What about the 20% limitation? Isn't QBI supposed to be the lesser of 20% of qualified business income or 20% of taxable income minus capital gains?

You're mixing up the QBI itself with the QBI deduction. The QBI is just your qualified business income figure - essentially your business profit with certain adjustments. The QBI deduction is generally 20% of your QBI, but is subject to limitations based on your overall taxable income, whether you're in a specified service business, and W-2 wages/business property factors. Cash App should calculate the actual deduction correctly once you give it the right QBI figure.

I contacted them last month about this exact issue. They acknowledged it's a known bug but didn't have an immediate fix. Their suggestion was to completely finish entering all your income and expenses first, then go back to the QBI section last. Apparently, sometimes it will recalculate correctly if you do it in that order. If not, they suggested calculating QBI manually and overriding their number.

1 Does the 5-year compliance thing mean I can't have ANY issues with taxes for 5 years? What if I file on time but can't pay everything that year? Would they bring back all my old debt too??

5 The compliance requirement means you need to file all required returns on time and pay any new tax obligations when they're due. If you can't pay a new tax bill in full, you need to work with the IRS immediately on a payment arrangement. If you violate the terms, then yes, the IRS can potentially revoke your OIC and reinstate the original tax debt, minus whatever payments you've made. They don't do this for minor issues, but it's a serious consideration - you're essentially promising to be a model taxpayer for those 5 years.

19 I used one of those companies and it was a complete waste of money. Paid them $4,000 up front and all they did was put me on an installment plan I could have set up myself for free on the IRS website. They promised they'd get me an OIC but after taking my money they said I "didn't qualify" - something they should have known from the beginning.

12 Wow thanks for the warning! Sounds like these companies are just preying on desperate people. I'll steer clear and either try to handle it myself or find a reputable local tax professional instead.

I didn't think about checking for other income! I did some babysitting for my neighbor a few times that probably paid about $350-400 total. They didn't give me any tax forms but I guess I should still report that? Would that count toward the $2,500? Also we definitely can't file jointly this year due to some complicated financial stuff with my husband's business. We've already worked out who's claiming which kid, just trying to figure out if I should stick with claiming my daughter or let her dad take her this year.

Yes, that babysitting income absolutely counts toward the earned income threshold! You should report it as self-employment income on Schedule C, even without formal paperwork. That additional $350-400 would put you over the $2,500 threshold and likely qualify you for the refundable portion of the Child Tax Credit. If filing jointly isn't an option due to your husband's business situation, then adding this self-employment income could be your best solution. In that case, you should definitely claim your daughter as planned since you'd now qualify for the benefits. Don't give up your year in the rotation with her father unless absolutely necessary.

This is super important! The child tax credit threshold is based on earned income while many other tax benefits are based on AGI. The tax code is so confusing sometimes.

Thank you so much for this explanation! So basically I should just bypass the depreciation question in TaxAct somehow? Would selecting "straight line" be the safest if I have to choose something, or should I go back and re-enter it differently to avoid that question entirely? The truck is 100% business use if that matters for the inclusion amount you mentioned.

If TaxAct won't let you proceed without selecting a depreciation method, I'd recommend going back and re-entering the vehicle information but categorize it as a leased vehicle expense rather than an asset to be depreciated. Most tax software has a specific section for business vehicle expenses where you can indicate it's leased rather than owned. If you absolutely have to choose a depreciation method as a workaround, straight-line would be the most conservative choice, but it's not technically correct since you don't depreciate leased assets. The 100% business use is great - it means you can deduct 100% of the lease payments (minus any inclusion amount). The inclusion amount is based on the fair market value of the vehicle and lease term - for a 3-year lease on a heavy vehicle, it's often minimal.

Does this same "no depreciation for leases" rule apply to regular lighter vehicles too? I've been doing it wrong for years if so...

So would I put "Head of Household" on the W4 and then just "1" for my son on Step 3? Does the Head of Household selection automatically adjust things for me?

Yes, you would check "Head of Household" in Step 1(c) and then put "1" for your son in Step 3. The Head of Household selection automatically adjusts your withholding calculations to account for the higher standard deduction and more favorable tax brackets that come with that filing status. This combination (HOH status + claiming your qualifying child) should help ensure your withholding is more accurate. If you want a slightly larger refund, you can add a small additional amount in Step 4(c) - maybe $25-50 per paycheck depending on your comfort level.

It's still $2,000 per qualifying child for 2024 (for 2025 filing season). Congress didn't extend the temporary increase that was in place during 2021. Children must be under 17 at the end of the year to qualify for the full credit.