Thanks for bringing this up - I hadn't considered this angle. Do you know if there's some kind of threshold before someone needs to officially register as a business? My friend is really just testing the waters with occasional food sales.

There's no specific threshold for when someone needs to register as a business - that varies by state and local regulations for food service. However, for tax reporting purposes, any income earned (even from a hobby) needs to be reported regardless of business registration status. The $600 threshold is just about when payment apps are required to send 1099-K forms. Your friend should be reporting the income even below that amount, but many people don't realize this. They might want to look into a Sole Proprietorship at minimum since it's the simplest business structure and would allow them to deduct legitimate business expenses against that income.

I actually had this exact issue come up during a business audit last year. The IRS didn't care at all that some of our business meals were from non-traditional vendors (food trucks, pop-ups, farmers market vendors). What they focused on was whether we had proper documentation of the business purpose, who attended, and proof of payment.

Shoot I didn't even think about the dependent thing! I'll definitely ask my parents. What kind of records should I keep exactly? I don't think Cashapp gives very detailed descriptions for each payment.

For record-keeping, you should save monthly statements from Cashapp as a start. But you're right that Cashapp descriptions are often vague or just have emojis. I recommend creating a simple spreadsheet where you note each incoming payment that was income (like your moving help) versus what was reimbursement. Even just a basic note for each transaction like "Mike paying me back for concert tickets" vs "Payment for helping move furniture" helps a lot. Take screenshots of conversations if people were paying you through Cashapp for services. The better your documentation, the easier it would be if there were ever questions.

Starting this year, payment apps are supposed to send 1099-K forms if you received over $600 in transactions, but I heard they delayed implementing that fully. For 2024 taxes (filed in 2025), you'll probably get a form if you crossed that threshold.

So what happens if you don't do the improvements within the 180 days? Do you lose the entire 1031 benefit or just the portion related to the improvements?

If the improvements aren't completed within the 180-day exchange period, only the actual completed improvements can be counted as part of the exchange. Any unused funds held by the QI for incomplete improvements would be considered "boot" and returned to you - and you'd owe taxes on that portion. You wouldn't lose the entire 1031 benefit, just the tax deferral on the portion that wasn't properly used within the timeframe. For example, if you earmarked $50,000 for improvements but only completed $30,000 worth within the 180 days, you'd owe taxes on the $20,000 difference. That's why it's crucial to be realistic about what improvements can actually be completed in that timeframe.

I did a reverse exchange last year. It's definitely more complex and expensive than a standard exchange, but doable. You'll need an Exchange Accommodation Titleholder (EAT) to take title to the new property while you sell your relinquished property. Expect to pay about twice as much in fees compared to a standard exchange. Make sure you have very secure financing lined up because you'll essentially be carrying both properties until your original one sells. The same 180-day rule applies - you must sell your original property within 180 days of acquiring the new one. I cut it close (sold on day 168) and the stress nearly killed me!

What if some of my HSA contributions were made directly by me (not through payroll)? I contributed $3,000 through my employer and then added another $2,000 on my own to max out the individual limit.

For contributions you made directly (not through payroll), those should definitely show up in the tax breaks section. In TurboTax, those direct contributions should be entered in the HSA section specifically, not as part of your W-2 entry. Those contributions will appear on Form 8889 Line 2 as "contributions made to your HSA" and will become an above-the-line deduction on your Form 1040 Schedule 1. This reduces your adjusted gross income directly. You should see these contributions reflected in your tax breaks section because they're giving you an additional deduction beyond what was already excluded from your W-2 wages.

Hmm, that's a good point - I need to check if I accidentally entered them twice. I know for sure I entered them during the W-2 section, but I can't remember if I also entered them again in the HSA section. I'll go back and review. Thanks for the tip!

Thanks for this perspective. I hadn't considered the "round-trip transaction" angle. If I were to actually relocate and live abroad full-time (which I'm planning to do anyway), would that strengthen the legitimacy of this arrangement at all? Or would the IRS still view the structure itself as problematic regardless of my residency?

Actually living abroad full-time would certainly help satisfy the physical presence test for the Foreign Earned Income Exclusion, but it wouldn't necessarily legitimize the overall structure. The IRS would still question why this particular business arrangement is necessary. They'd look at factors like: Does this foreign management company have any employees besides you? Does it manage properties for anyone else? Is the fee structure comparable to what unrelated property management companies charge? Does the company have legitimate business operations in the foreign country?

Is that the same as the GILTI tax stuff I keep hearing about with foreign corporations? I thought that made foreign corps less attractive after the 2017 tax law changes.