Quick question for anyone who's dealt with this: does the 5-year rule affect Form 8606 for Roth contribution withdrawals? I've had my Roth for only 3 years but I'm withdrawing some contributions this year.

I went through this exact scenario last year and can confirm - you absolutely need Form 8606 for early Roth contribution withdrawals. The confusion comes from the fact that many brokerages give incomplete advice about this. Here's what I learned: Your 1099-R will show the distribution happened, but it doesn't tell the whole story about WHETHER those dollars were contributions vs earnings. Form 8606 is essentially your proof to the IRS that you're withdrawing money you already paid taxes on (your contributions) rather than tax-free growth (earnings). The $4,300 difference you saw in TurboTax is exactly what happened to me too - without the 8606, the software assumes the worst case scenario and treats more of your withdrawal as taxable/penalized. Don't skip this form. I know it seems redundant, but it's your protection against the IRS assuming you withdrew earnings instead of contributions. Better to be over-documented than under-documented with retirement account withdrawals.

Something nobody's mentioned - in Michigan specifically, you still need to file annual statements with the state for LLCs even if they had no activity. It's only $25 per LLC, but if you miss it, Michigan can technically dissolve your LLC and there are penalties for late filing. So while your federal tax situation might be fine as others have said, make sure you're current with Michigan's Department of Licensing and Regulatory Affairs (LARA) requirements too!

Your accountant is likely being overly cautious or may not be familiar with LLC tax requirements. Based on what the IRS told you directly, you're probably in the clear. Here's why: For single-member LLCs that are "disregarded entities" (the default), they're reported on your personal tax return via Schedule C. If there was no activity, you'd report zero income and zero expenses. The penalties your accountant mentioned ($295/month per LLC) sound like they're referencing partnership return penalties (Form 1065), but those only apply if you elected to be taxed as a partnership. Since you never received penalty notices and the IRS confirmed you don't owe anything for the LLC without an EIN, I'd trust their word over your personal tax preparer who admittedly only does individual returns. My recommendation: If you're not planning to use these LLCs, properly dissolve them with Michigan and file final "zero activity" returns to close them out with the IRS. This prevents any future confusion. Don't pay $7,080 in penalties without getting a second opinion from someone who specializes in business taxes - that amount seems completely disproportionate for dormant entities that never operated.

I use a "purchase record form" for exactly this situation. I created a simple template that has spaces for date, item description, amount paid, business purpose, seller info, and how I paid. I also attach a photo of the item in use for my business. Been doing this for 3 years with no issues.

I'd be happy to share! I keep it really simple - just a basic Word document with fields for: • Date of purchase • Item description (desk, chair, filing cabinet, etc.) • Amount paid ($650 in your case) • Payment method (cash, check, etc.) • Seller information (name/contact if available) • Business purpose (home office setup for consulting business) • Supporting evidence (screenshots of messages, photos, bank withdrawal records) I print it out, fill it by hand, and scan it back in to keep with my digital records. The key is doing it as close to the purchase date as possible so it's "contemporaneous." For your Facebook Marketplace purchase, this would work perfectly since you have those messages and photos already. You can find similar templates by searching "business expense documentation form" or "receipt substitute form" online. The IRS doesn't require any specific format - they just want to see that you made a good faith effort to document legitimate business expenses.

Make sure you're keeping a detailed spreadsheet of all transactions! I had a similar issue with my eBay 1099-K last year and got audited because my deductions seemed high compared to my reported income. I had to prove every single purchase with receipts. Screenshots of your StubHub purchase history won't be enough if you get audited - you need actual receipts or credit card statements showing what you paid for each ticket.

I went through this exact same situation with my concert ticket reselling last year! The panic is totally understandable when you see that 1099-K amount, but you're definitely on the right track thinking about deductions. One thing I learned the hard way - make sure you're treating this as a business from the start. Since you're already making regular sales and have business expenses, the IRS will likely view this as a business activity rather than occasional personal sales. This means Schedule C is probably the right approach. A few practical tips: Start organizing your records NOW while it's still fresh. Create a simple spreadsheet matching each ticket purchase to its sale - this will be crucial if you ever get audited. Also, don't forget about the StubHub seller fees that get deducted from your payouts - those are deductible business expenses too. For TurboTax, look for the "Business Income and Expenses" section and select Schedule C. It will walk you through entering your 1099-K income and then guide you through the expense categories. Your ticket costs go under "Cost of goods sold" and things like gas, fees, and subscriptions go under regular business expenses. You've got this! The key is just being thorough with your documentation.

Quick tip that most people miss: keep track of ALL medical-related mileage! Every mile driving to doctors, pharmacies, treatments, etc. is deductible at 22 cents per mile for 2024. Doesn't sound like much but it adds up fast if you had lots of appointments.

Just wanted to add one more thing that might help - make sure you're tracking any over-the-counter medications that were prescribed by your doctor! A lot of people don't realize that OTC meds like aspirin, allergy medicine, or pain relievers can be deductible if your doctor specifically recommended or prescribed them. You'll need documentation showing the doctor's recommendation (like a note in your medical records or a written prescription), but it's another way to boost your medical expense total. I discovered this when going through my bills and found several OTC items my cardiologist had recommended that I completely forgot about. Also, don't forget about medical equipment like blood pressure monitors, glucose meters, heating pads, or anything else your doctor recommended for treatment. These all count toward your medical expenses too!