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Just want to share my experience - I tried deducting my patio renovation as a business expense because I host client meetings there. Got audited. It was not fun. The IRS agent basically said home improvements that add value to your property are almost never deductible as business expenses, even if you sometimes use them for business. What DID work for me was claiming a portion of my utilities and internet as business expenses based on the percentage of my home used exclusively for business. That's the key word - "exclusively.
Did you try writing off the furniture for the patio instead of the construction? Like outdoor tables or chairs used for client meetings? Wondering if that would be treated differently.
Yes, I was able to deduct the outdoor furniture since it was clearly business-related and doesn't add permanent value to the home. The IRS treats movable business assets differently than permanent improvements. The agent actually suggested keeping a log of client meetings to demonstrate business use of those assets. Furniture is typically depreciated over 7 years for business use, but depending on cost you might be able to use Section 179 to deduct it all in one year. Definitely different than trying to deduct the actual construction of the deck or patio.
Has anyone successfully used the home office deduction? I'm trying to figure out if it's worth claiming or if it's an audit red flag. I've heard both.
Something critical that hasn't been mentioned yet is the concept of "tax residency" vs just physical presence or visa status. The US-Canada tax treaty has specific provisions that might apply to your situation as a Canadian citizen. Even if you meet the substantial presence test, you might be able to claim closer connection to Canada under the treaty's "tie-breaker rules" if you maintain significant ties there. However, claiming treaty benefits requires filing Form 8833, which actually puts you on the IRS radar rather than hiding from it. And if you're trading US securities while physically present in the US, that income may still be considered US-sourced regardless of treaty provisions. The offshore entity adds another layer of complexity because of anti-avoidance rules like CFC (Controlled Foreign Corporation) regulations. If you control the entity, the IRS may look through it and tax you directly.
Can you clarify how the tie-breaker rules work? I'm a Canadian citizen on TN status but have been in the US for 4 years. I was told I can't claim treaty benefits anymore because I'm clearly a US resident for tax purposes now.
Tie-breaker rules look at factors like where you have a permanent home, center of vital interests (closer personal/economic ties), habitual abode, and nationality. After 4 years in the US on a TN, it's difficult (but not impossible) to claim closer connection to Canada. You would need to demonstrate stronger ties to Canada than the US - permanent home there, family, bank accounts, voting, etc. The longer you stay in the US, the harder this becomes. Most tax professionals advise that after 3-4 years, you're likely a US tax resident unless you've deliberately maintained stronger Canadian connections. Filing Form 8833 to claim treaty benefits doesn't guarantee approval - it just asserts your position.
Everyone's missing a crucial point here. The INTENTION behind your structure matters legally. If the IRS determines the primary purpose of your offshore structure is tax avoidance rather than legitimate business purposes, you could face serious consequences beyond just taxes. I'm not an expert, but I've seen cases where people were hit with civil penalties and even criminal charges under various anti-money laundering and tax evasion statutes. The IRS and FinCEN don't look kindly on structures designed primarily to hide income. If you're trading US markets while physically present in the US, using an offshore entity primarily for tax benefits is exactly the kind of arrangement that gets flagged. The "economic substance doctrine" means the IRS can disregard arrangements that don't have legitimate business purpose beyond tax savings.
This is a really important point. My friend went down this road with a Cayman Islands setup for his trading business. Ended up with a full IRS audit, massive penalties, and had to pay all back taxes plus interest. The IRS agent specifically cited the lack of economic substance to the arrangement as the primary issue. Not worth the risk.
Have you looked into whether your employer offers a Section 125 Cafeteria Plan? Some employers allow domestic partners to be covered pre-tax through these plans, which could eliminate the imputed income issue. My company started offering this last year and it saved me from the exact problem you're describing.
I haven't heard about this option. I'll definitely ask HR about it tomorrow. Do you know if there are specific requirements for a domestic partner to qualify under a Section 125 plan? Or does it vary by employer?
It does vary by employer, but generally they require proof of financial interdependence like joint bank accounts, shared lease/mortgage, or being named as beneficiaries on insurance policies. Some employers also require an affidavit that you've been in a committed relationship for a certain period (often 6-12 months). The key thing is that Section 125 plans allow employers more flexibility in defining eligible participants than standard health plans. Not all employers offer this option though, as it requires specific plan administration. Definitely worth asking about!
lol just get married already, problem solved π€·ββοΈ srsly tho why deal with all this tax headache for "personal reasons" when marriage would instantly fix it and probably save you thousands?
That's a pretty insensitive comment. There are many valid reasons people choose not to get married that have nothing to do with their commitment level. Financial considerations are just one factor in that decision.
Just adding some clarity on this whole W-2 vs 1040 thing: - W-2: This is given to you by your employer showing your annual income and tax withholdings. Your employer also sends a copy to the IRS. - 1040: This is your actual tax return that you need to submit (either yourself or through a preparer). The information from your W-2 goes onto your 1040. You definitely need to make sure your 1040 was filed, either electronically or by mailing the paper form. If your tax preparer gave you a paper copy but didn't confirm he e-filed it, you need to ask him directly or check with the IRS.
THANK YOU ALL for explaining this! I feel so dumb now lol. I guess I need to call my tax guy again to see if he actually submitted the 1040 for me or if I need to do it myself. Makes so much more sense now that the W-2 is just info FROM my employer and the 1040 is what actually gets sent TO the government. Definitely gonna be more careful next year and maybe try one of these tools you guys mentioned instead of using my uncle's church friend...
Don't feel dumb at all! Tax forms are confusing and nobody teaches us this stuff. When you talk to your tax preparer, specifically ask if he e-filed your 1040 and ask for confirmation of the submission. Most tax software or professionals can provide an acknowledgment when the IRS accepts your return. If you can't reach him, calling the IRS directly is your best bet to see if a return has been filed under your Social Security number for this tax year.
This happened to me last year...my "tax guy" gave me copies of everything but never actually filed! I only found out when I didn't get my refund and the IRS had no record of my return. Now I always use tax software that gives me a confirmation when the IRS accepts my return.
Marcus Patterson
Another perspective - I'm a college student now, but I worked all through high school while being claimed as a dependent. My income never affected my parents' tax refund. The only thing that happened is I had to file my own tax return each year. The benefit was actually huge for me: I learned about taxes early, built up work experience, and even qualified for some tax credits when I started college because I had a work history. Plus now I have a good credit score because I started building credit early. Don't let tax confusion stop you from getting valuable work experience as a teen! Your future self will thank you.
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Morgan Washington
β’That's really encouraging to hear! Did you have to do anything special on your tax return to make sure your parents could still claim you as a dependent? I'm worried about filling something out wrong and messing up my parents' taxes.
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Marcus Patterson
β’Nothing complicated at all! On your tax return (if you need to file one), there's just a checkbox that says "Someone can claim you as a dependent." You check that box, and that's it! You file your return, your parents file theirs claiming you as a dependent, and everything works out fine. The first year I filed, my dad helped me through it using TurboTax, and it was actually way easier than I expected. After that, I did it myself. When you're a dependent with a simple job, tax filing is usually very straightforward - just a few forms to fill out.
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Lydia Bailey
One important thing no one's mentioned - some of your income might be completely tax-free if you're 16! If you're doing babysitting, lawn mowing, pet sitting, or other household-type work directly for people (not through a company), that's considered "household employee" work. If you earn less than $2,600 from any ONE household in 2025, that employer doesn't have to withhold Social Security or Medicare taxes, and you don't have to report that income if your total earnings are below the filing threshold! So you could potentially earn quite a bit without ANY tax consequences at all, depending on the type of work.
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Mateo Warren
β’This isn't completely accurate. You're confusing household employee rules with self-employment. If someone is babysitting or doing lawn work as an independent contractor (which most teen jobs like this are), they need to file if self-employment income exceeds $400, even if they're a dependent.
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