How do you handle partial usage? Like I have boots that I wear mostly for faires but occasionally in regular life because they're comfortable. Can I still deduct those or is it an all-or-nothing thing?

You can actually claim a percentage deduction based on business vs. personal use. For those boots, you'd estimate what percentage of time they're worn for business purposes. If you wear them 80% for faires and 20% for personal use, you can deduct 80% of their cost. Just be reasonable with your estimates and be prepared to explain your calculation if asked. You should also keep a log of when you wear them for business versus personal use if it's a significant deduction. Some performers I know take dated photos of themselves at events in costume as additional documentation. The key is being honest but thorough about tracking legitimate business usage.

Documentation is everything! I got audited 2 years ago for my performer expenses. The IRS approved ALL my costume deductions because I had: 1) receipts, 2) photos of me performing in each item, 3) contracts stating costume requirements, and 4) a log showing when/where each piece was used professionally. Without that evidence, I'd have been denied too.

Thanks for the heads up! I am the only owner of the LLC. Do I need to do anything special to make sure I'm being taxed as a sole proprietor? I don't think I filled out any additional forms after creating the LLC.

You're already set then! Single-member LLCs are automatically treated as "disregarded entities" for tax purposes, which means you'll report your business income and expenses on Schedule C of your personal tax return. No additional tax forms are needed to select this treatment - it's the default. You'll use your personal SSN for most tax purposes, though you should have an EIN (Employer Identification Number) for your LLC as well. This setup is the simplest for your situation and allows you to deduct all legitimate business expenses like your Fiverr payments directly against any income the business generates.

This is super important. I've been creating comics for years and the IRS did question my expenses once. What saved me was having a detailed log of hours worked, draft versions showing progress, and a marketing strategy document. Even though I wasn't profitable yet, I could show I was seriously trying to be.

Oh wow, I hadn't even considered local taxes! I know I'll be working in Chicago for about a month - does anyone know if they have special local tax requirements? This is getting more complicated than I expected.

Chicago doesn't have a city income tax like some other major cities, so you're safe there. You'll just need to deal with Illinois state income tax for the period you're working in Chicago. However, if your contract takes you to New York City, Philadelphia, San Francisco, or certain cities in Ohio or Michigan (among others), you'll need to account for local income taxes as well. It's definitely worth researching each location before you go. Some cities have very low thresholds - Philadelphia, for instance, starts taxing non-residents from day one of working there.

The fees vary wildly by state. When I registered my LLC in Nevada, Colorado and Texas last year, the initial registration fees were around $150-200 per state. But then many states also have annual report fees or franchise taxes. California is notoriously expensive with their $800 minimum franchise tax regardless of whether you make any money there.

Thanks for the insight! So just to be clear, since the GoFundMe was specifically to help with flood damage repairs and donors didn't get anything in return, I probably don't need to report it as income? Do I need to keep any specific documentation besides the withdrawal statements from my bank?

That's correct - funds received as gifts to help with your personal hardship (like flood damage) with no goods or services provided to donors would generally be considered non-taxable gifts. The IRS doesn't require you to report gifts you receive on your tax return. I would recommend keeping documentation that clearly shows the purpose of the GoFundMe campaign (screenshots of the campaign page would be ideal), records of the deposits to your bank account, and documentation of how you used the funds for flood repairs (receipts, invoices, etc.). While this might seem excessive, having this documentation will make things much easier if questions ever arise.

Actually the $600 threshold has been delayed AGAIN for 2023 tax year too! They're still using the $20,000/200 transactions threshold. The $600 threshold keeps getting pushed back because of all the confusion it would cause.

Thanks for this tip. I just checked the IRS website and there's definitely no record of my 2022 return. I didn't know I needed to specifically check the IRS site after filing through TaxAct - I thought the "completed" status meant everything was done. Do you know if TaxAct has any responsibility here since their interface was misleading?

Unfortunately, if you read the fine print in TaxAct's terms of service, they probably have language that places the responsibility on you to verify successful transmission. Most tax software companies include clauses stating they're not liable for transmission failures or penalties. You might still have recourse though. Check if your TaxAct account shows any specific error codes related to your 2022 return. Sometimes there are failed submission codes that can help prove you attempted to file but their system had an issue. Also, print out your complete 2022 return from TaxAct to show it was completed on time, which will help with your penalty abatement request to the IRS.

Did the Taxpayer Advocate actually answer the phone when your sister called? I've tried calling them multiple times and always get a message saying they're too busy and to call back another time.