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Just wanted to add - if you're using TurboTax, make sure you get the right version. The basic/free version doesn't support Schedule C. You'll need Self-Employed or possibly Home & Business. FreeTaxUSA handles Schedule C in their Deluxe version which is WAY cheaper than TurboTax tho. Also, make sure you're tracking all your business miles if you drive to different job sites for your renovation work! That adds up to a big deduction.
Is there a good app you recommend for tracking business miles? I always forget to log them and probably lost out on hundreds in deductions last year.
I use MileIQ and it's been super helpful. It automatically tracks when you're driving and then you just swipe right for business trips and left for personal. Takes like 2 seconds per trip. Stride is another good one that's free, but I find it misses some trips since you have to manually start tracking. Either way, the standard mileage deduction is 65.5 cents per mile for 2023, so it adds up crazy fast especially for renovation work where you're going to different job sites!
Anyone else notice their tax software always suggests amending previous years' returns? I used H&R Block last year for my cleaning business and it kept suggesting I amend 2022 to claim missed deductions. Is this just a way to charge more fees or actually worth looking into?
In my experience it's worth checking! I amended my 2022 return after ignoring that message for months and got an additional $1200 refund. I had missed some legit business expenses my first year. Different software sometimes finds different deductions.
11 Just a heads up for anyone reading this thread - make VERY sure you're handling this correctly because 1099 reporting has gotten much stricter. If you're issuing 1099s, the amounts you report need to match what you put on your Schedule C. If there's a mismatch, it can trigger an automatic review.
3 What's the threshold for needing to issue a 1099 to a contractor now? I thought it was $600 but someone told me it changed recently?
16 Stupid question maybe but do I need to include the payment processor fees when determining if I've hit the $600 threshold for issuing a 1099? Like if I paid someone $590 but with fees it was $608 total cost to me, do I need to issue a 1099?
One thing nobody's mentioned yet - your coworker needs to be careful about state residency too, not just federal. New York is particularly aggressive about claiming tax residency. Since they were in NY for 6 months, NY will almost certainly consider them a statutory resident and try to tax their worldwide income. I learned this the hard way after working in Singapore for 7 months but maintaining my NY apartment. Even though I qualified for the Foreign Earned Income Exclusion federally, NY state still wanted taxes on my Singapore income!
Oh wow, I hadn't even thought about the state tax implications. Do you know if there's any way around this? Would it help if they established residency in another state before going to Pakistan next time?
Yes, establishing residency in a no-income-tax state before leaving for an international assignment can help. States like Florida, Texas, Nevada, etc. would be options. They would need to genuinely establish residency though - driver's license, voter registration, bank accounts, etc. For the current situation, they should look closely at NY's 183-day rule. If they were physically present in NY for fewer than 183 days and don't maintain a permanent abode there, they might have an argument against NY residency. However, with 6 months (approximately 180-183 days), they're right on the edge. Documentation of exact days in and out of NY will be critical.
Has anyone mentioned Form 8833? For treaty positions like this, you might need to disclose the specific tax treaty provisions you're relying on using this form. I got hit with a penalty last year because I claimed a treaty benefit but didn't file the proper disclosure form.
Is filing state returns actually required for F1 students? I've heard mixed things. Some of my friends only file federal and Form 8843.
It depends entirely on your state and your income situation. If you earned income in the state, then yes, you generally need to file a state return. If you received only fellowship/scholarship money and none of it was for services (like teaching or research), then some states don't require a return. I learned this the hard way when I skipped filing a state return my first year, and got a letter from the state tax department the next year. Not worth the stress!
Has anyone tried using Glacier Tax Prep instead of Sprintax? My university offers it for free for federal returns but still charges for state returns. Wondering if it's any better or easier to use?
I used Glacier last year and it was pretty straightforward for the federal return. The interface isn't as fancy as Sprintax but it gets the job done. For state returns, I ended up just filing directly through my state's department of revenue website since my situation was simple. Saved about $35 that way.
Molly Chambers
My accountant told me that this is actually pretty straightforward. It IS income in the year you receive it, despite your intentions. What you do with the money afterward (saving it, spending it, giving it back) doesn't change the fact that it's income when received. But if you're planning to give it back as a gift later, just make sure you stay under the annual gift tax exclusion amount (currently $17,000) when you do give it to her, and you won't have any additional tax implications on that end.
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Ian Armstrong
ā¢Does it matter if they're tracking it separately in a dedicated account? I've heard that can sometimes make a difference with the IRS if the money is clearly segregated.
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Molly Chambers
ā¢Keeping the money in a separate account is good practice and helps demonstrate your intent, but unfortunately it doesn't change the fundamental tax treatment. The IRS generally looks at the nature of the transaction when it occurs, not what you intend to do with the proceeds later. Having a separate account does provide a clear paper trail though, which is always helpful if questions ever arise. It shows you weren't trying to hide anything and had a specific purpose for the funds.
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Eli Butler
Has anyone considered setting up a 529 college savings plan with this money instead? If your daughter might use it for education in the future, you'd still need to report the rental income BUT the money could grow tax-free if used for education expenses later. Might be a win-win?
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Marcus Patterson
ā¢This is actually brilliant! My sister did something similar with her kids' "chore money" - she reported it properly as rental income but then put it in 529s for them. The growth being tax-free for education expenses made it really worthwhile.
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