I don't think she has much unearned income, maybe like $20 in her savings account. But that's good to know for the future. At what point would I need to include her unearned income on MY return instead of hers?

With just $20 in interest, you definitely don't need to worry about it for this year. That's well below any reporting threshold. For your question about when unearned income goes on your return versus hers - you have options when a dependent has significant unearned income. If your dependent has unearned income over $2,300 (for 2024), you can either have them file their own return reporting it OR you can include it on your return using Form 8814. Many parents choose to include it on their return to simplify things, but sometimes it's more tax-advantageous to have them file separately. It depends on both your tax situation and theirs.

I used FreeTaxUSA for my daughter's return last year and it was great! Completely free for federal and only $15 for state. Super straightforward for dependent returns, especially if they just have W-2 income. Highly recommend.

Thanks for bringing this up! I've been making quarterly payments but didn't know about the QBI deduction. With my income being around $40k, would I qualify for the full 20%? And does filing as head of household affect the QBI calculation at all?

At your income level of around $40k, you would qualify for the full 20% QBI deduction with no reductions or phase-outs. The QBI limitations don't kick in until much higher income levels (over $170k for single/HOH filers). Filing as head of household doesn't directly affect the QBI calculation, but it does affect your overall tax situation positively. The HOH status gives you better tax brackets and higher standard deduction, while the QBI is calculated based on your qualified business income from self-employment. They work separately but combine to reduce your total tax burden.

What kind of proof did they ask for? I'm worried about this exact situation.

How do you decide what percentage of things like internet and cell phone to deduct when you use them for both personal and business purposes? I've heard conflicting advice about this.

The general rule is to deduct the percentage that you use for business purposes. For example, if you use your cell phone about 60% of the time for business calls/emails/etc., then you can deduct 60% of your cell phone bill. It's important to have some reasonable basis for determining these percentages. Some people keep logs for a sample period (like tracking business vs. personal internet usage for a few weeks) to establish their percentage. Others base it on time spent working vs. personal time. Whatever method you choose, just be consistent and make sure you can explain your reasoning if asked.

I've used TurboSelf-Employed for the past two years and it's definitely worth it for me. It walks you through all the self-employment forms step by step and automatically calculates your quarterly estimated payments. It also helps identify deductions I would have missed on my own. The expense categorization feature saves me tons of time - it learns which categories to assign to recurring expenses. And it keeps a running estimate of what I'll owe so there are no surprises at tax time.

Thanks for the advice. I've been reading through my contract and you're right - there's an arbitration clause buried in the fine print. Did your sister have to hire a lawyer to get her money back, or was she able to handle the complaint process herself?

She handled most of it herself with just a little guidance from a lawyer friend. The key was documenting everything thoroughly - she created a timeline of all promises made, services not delivered, and every interaction with the company. For the attorney general complaint, she included copies of all contracts, recordings of phone calls (where legal), and a detailed account of the harm caused. The most effective part was when the attorney general's office started their investigation. Companies often respond quickly when an official agency gets involved. She didn't have to proceed to formal arbitration because the company offered a settlement once they realized she was serious about pursuing all available channels. Stay persistent and document everything.

The IRS does take action against fraudulent tax resolution companies, but they're more focused on practitioners who are directly misrepresenting IRS rules or filing false documents. For consumer protection issues like this, the FTC and state agencies usually have more immediate jurisdiction. That said, reporting to multiple agencies increases the chances of action.

Thanks for mentioning Section 179! I do have some shelving units and a computer system I use exclusively for the business. Would those qualify? And what's the max I can deduct this way?

Those shelving units and computer

Exactly this! I made this same mistake my first two years in business. The IRS doesn't care what you do with your profits - reinvest them, pay debt, whatever. They care about revenue minus deductible expenses. Paying down loan principal isn't a deductible expense.