Is there an easy way to figure out how much to pay for those quarterly payments? Our situation involves some rental income on top of our regular jobs, and I think that might be why we keep owing so much.

For rental income, you'll want to estimate your annual rental profit (income minus expenses) and multiply by your tax bracket percentage. Then divide that amount into four equal payments. A simple approach is to take whatever you owed last year and divide by 4 - that's usually enough to avoid underpayment penalties under the "safe harbor" rule. The IRS only requires you to pay 90% of this year's taxes or 100% of last year's tax amount (110% if your income is over $150,000), whichever is smaller. If your rental situation is complex, you might want to consult with a tax professional for the first calculation, then you can handle the quarterly payments yourself going forward.

This is exactly right! The "don't give the government an interest-free loan" advice only makes sense if you're disciplined enough to actually invest that money instead. For many people, slightly overwithholding is a painless way to save.

Can you really use de minimis for a converted personal asset though? I thought that only applied to new purchases specifically for the business.

You're right to question this - there's some nuance here. The de minimis safe harbor typically works best for new business purchases. For converted personal assets, the IRS generally wants you to use depreciation based on the fair market value at the time of conversion. That said, there are some tax professionals who believe you could potentially apply de minimis in the year of conversion if you properly document the fair market value and business use percentage. It's definitely a gray area though, and depreciation is the more conservative and clearly acceptable approach.

Not everyone has the money to buy multiple devices though. When you're just starting out self-employed, you've gotta work with what you have. The tax savings from properly deducting a converted laptop could help fund that dedicated device later.

Thank you for this suggestion! We'll definitely try FreeTaxUSA as a comparison. When we put our info into TurboTax, we only got to the W-2 part before seeing the amount we owe. We haven't added any deductions yet, but I'm worried TurboTax will make us pay for upgrades to add things like student loan interest. Do you know if FreeTaxUSA lets you enter student loan interest and charitable donations without upgrading to a paid version?

FreeTaxUSA includes ALL federal tax forms and deductions in their free version, including student loan interest, charitable donations, investment income, self-employment, etc. The only thing you pay for is state filing ($15) or audit assistance if you want it. That's actually one of the biggest differences - TurboTax's "free" version is only free for very simple returns, then they charge for adding forms like student loan interest deductions. FreeTaxUSA doesn't do that bait-and-switch thing. I usually run my taxes through both just to double-check my results, and they've always matched within a few dollars.

Or stimulus payments! Some people think those were tax-free but they actually impact your return if you got them.

Did you have to completely redo your operating agreement or was there some kind of amendment you could add? We're already 2 years into our business and wondering if we need to start from scratch with a new agreement.

We didn't have to completely redo the operating agreement. Our attorney drafted an amendment specifically addressing profit allocations that referenced the original agreement. All partners had to sign it, and we made sure to include clear language about the business purpose for the special allocation. We also addressed your exact situation by including provisions for how to handle changes in future years, requiring unanimous consent for any allocation changes and setting deadlines before year-end for making such decisions. This prevented last-minute surprises at tax time when someone might change their mind.

This happened to me! Got allocated 45% of profits due to "sweat equity" but actual distributions were split evenly. Ended up owing way more in taxes than I expected and didn't have the cash. Now we adjust distributions quarterly to account for estimated tax payments.

I understand your point theoretically, but most regular people aren't investing that extra $50-100 per paycheck. It's just getting spent. For many people, tax refunds function as a forced savings plan. I personally prefer getting a chunk back because otherwise that money would just disappear into my daily spending.

You're making a fair point about the psychological benefit. The math doesn't lie though - if you're getting $3000 back, that's $250 per month you could have had in your pocket. Even if you just put that in a high-yield savings account at 4%, you'd earn an extra $70+ over the year. Not life-changing but still better than giving it to the government for free. The real solution is to improve financial discipline rather than using the tax system as a savings account.

I noticed this too! I was getting a really low refund and right after showing me that number, they immediately tried to sell me audit defense for an extra $49.99. Seems predatory to me.

That's exactly what happened to me! It honestly feels like they're using scare tactics. When I went through the same info with FreeTaxUSA instead, I got a much higher refund estimate without all the upsell attempts. I'm never using TurboTax again.