One thing nobody mentioned yet - KEEP YOUR OLD PHONE as a backup for your business! My tax person told me this creates a stronger case for the new phone being primarily for business use. If you're still using your personal phone for most personal stuff and the new one mostly for eBay, it's easier to justify a higher business use percentage.

Great discussion everyone! As someone who's been through this exact situation with my online business, I wanted to add a few practical tips that helped me: 1. **Screen time reports are your friend** - Both iPhone and Android have built-in screen time tracking that shows how much time you spend in each app. Screenshot these monthly and keep them in a folder labeled "Business Records [Year]". This creates concrete evidence of your business vs personal usage patterns. 2. **Document your business justification** - Write a simple one-page memo explaining WHY you need the phone upgrade for your business (bigger screen for barcode scanning, faster processor for inventory management, better camera for product photos, etc.). This shows the IRS that it's a legitimate business need, not just wanting a new toy. 3. **Consider your upgrade timing** - If possible, buy the phone early in the tax year so you can establish a full year of business usage patterns. This makes your deduction more defensible. 4. **Don't forget accessories** - Business-related phone accessories (cases, car mounts, portable chargers used for business) can also be deducted using the same business percentage. The key is being reasonable and consistent with your documentation. The IRS knows that business owners use their phones for both purposes - they just want to see that you're not claiming 100% business use when it's clearly mixed.

The 5500-EZ filing requirements are so confusing! I missed filing mine too and got hit with penalties. Does anyone know which tax software handles these forms properly? I use TurboTax for my regular taxes but they don't seem to support these specialized retirement plan forms.

I went through this exact same situation last year! The panic is real, but you're not alone in missing this filing requirement. Here's what I learned from my experience: First, yes you do need to file Form 5500-EZ for plan termination even though it's been 2 years. The IRS considers a rollover to an IRA as terminating the Solo 401k plan. Since your combined plan assets were around $270k, you definitely exceeded the $250k threshold that triggers the filing requirement. The good news is that the IRS has reasonable cause provisions for late filings, especially when you can demonstrate that the failure was due to circumstances beyond your control - like not being informed by your financial institutions about this requirement. When you file, include a detailed reasonable cause statement explaining exactly what happened: the TD Ameritrade acquisition, Schwab's inability to support Roth 401ks, and the fact that neither institution informed you of the 5500-EZ requirement. Document everything with dates and reference any correspondence you had with them. I also recommend checking if you qualify for the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP), which often results in reduced penalties for good faith late filers. Don't wait any longer though - the penalties do continue to accrue, and voluntary compliance always looks better than being contacted by the IRS first.

Has anyone used an umbrella LLC with a separate tax election for the entity? My CPA suggested forming an LLC but then electing to have it taxed as an S-Corporation (Form 8832 followed by Form 2553). He said it gives the liability protection and flexibility of an LLC with the tax benefits of an S-Corp.

This is a great discussion thread! I'm in a very similar situation - household income around $380K and considering a side business. One angle I haven't seen mentioned much is the state-level implications. I'm in Texas (no state income tax), but for those in high-tax states like California or New York, the state treatment of S-Corps vs LLCs can significantly impact the overall analysis. Some states don't recognize S-Corp elections and will tax the entity at the corporate level regardless. Also, regarding the ownership question - even if your spouse isn't actively involved, there could be estate planning benefits to joint ownership, especially if the business becomes successful. If something happens to you, having your spouse as a co-owner can simplify business continuity compared to having to transfer a sole proprietorship through probate. Has anyone factored in the potential exit strategy implications? If you plan to eventually sell the business or bring in outside investors, the corporate structure (even if taxed as S-Corp) might be more attractive to buyers than an LLC structure.

Everyone's giving good advice about claiming a domestic partner, but don't forget to consider the future! When your partner finishes law school and starts working, your tax situation will change dramatically. My wife and I were in the same boat (I supported her through med school), and we actually ended up paying MORE in taxes after marriage because of the marriage penalty when both people have good incomes.

Just wanted to chime in as someone who works in tax preparation - you're on the right track! Based on your description, your domestic partner would likely qualify as a "qualifying relative" dependent. The key things to document are: 1. Keep receipts for all the expenses you're paying (rent, utilities, groceries, phone, insurance) 2. Get a statement of his total student loan disbursements for the year 3. Track any income he earns from tutoring or other sources Since you mentioned he only makes about $2,500 from tutoring and the loans only cover tuition/books while you handle all living expenses, you should easily meet both the income test (under $5,000) and the support test (you're providing more than 50% of total support). One thing I always tell clients - calculate the actual dollar amounts to be sure. Add up everything: tuition, books, rent, food, utilities, transportation, clothing, medical expenses, etc. Then make sure your contributions are more than half of that total. It sounds like they definitely are, but having the numbers documented will give you confidence and protection if questions ever arise. The dependent exemption can be a significant tax benefit, so it's worth claiming if you qualify!

Quick tip that helped me - if you can pay even part of what you owe immediately, do it! Even paying $500-1000 of your balance shows good faith and might make them more willing to work with you on the rest. I was able to get on an installment plan for the remaining balance and they held off on filing the lien.

Don't let this overwhelm you - a Notice of Federal Tax Lien sounds scarier than it actually is in practice! I went through something very similar about 18 months ago when I owed around $4,200 to the IRS after some freelance work complications. The key thing to remember is that the IRS actually WANTS to work with you - they'd rather get their money through a payment plan than go through the hassle of seizing assets. When I called them (after many attempts to get through), the agent was surprisingly understanding and helped me set up a $130/month payment plan. Here's what I wish I'd known earlier: once you're on an approved installment agreement, they typically won't file the lien as long as you keep making your payments on time. Even if they do file it, you can request a lien withdrawal after making just 3 consecutive payments under your agreement. My biggest mistake was waiting so long to contact them. The penalties and interest kept piling up while I was avoiding the situation. Act now - call them first thing Monday morning, explain your job loss situation, and they'll likely be very willing to work with you on affordable monthly payments. You've got this!