16 That's a really good point! How did you handle the amounts on the 1099-NEC? Did you just report the check amounts or the total? I'm in this exact situation with a web designer I've been using.

21 I only reported the check amounts on the 1099-NEC I issued. The PayPal payments were handled by their 1099-K reporting. My accountant explained that if I included the PayPal amounts on my 1099-NEC, the contractor would have the same income reported twice to the IRS (once on my 1099-NEC and once on PayPal's 1099-K). It was a bit confusing because my tax software wanted me to enter the total paid to each contractor, and I had to manually adjust the reportable amounts. Definitely keep separate payment records by method for each contractor if you're using multiple payment types!

13 The $600 reporting threshold for third-party payment networks is supposed to be in effect for 2024 (filed in 2025). The IRS issued Notice 2023-10 for the delay that affected 2023 filings, but unless they issue a new notice, we should assume the $600 threshold applies for 2024 payments. It's always possible they'll announce another delay though.

Wait seriously?? I have to pay EXTRA tax on top of regular income tax? I thought the whole point of writing off the equipment was to pay less taxes. Does this mean I'll end up owing more than if I just didn't report the photography income at all?

You do need to pay self-employment tax, but don't panic! You'll still benefit from deducting your equipment expenses. Here's how it works: your business profit (income minus expenses) is what gets taxed. By deducting legitimate expenses like your camera equipment, you're reducing your taxable profit. Not reporting income isn't a good strategy. It's legally considered tax evasion, and the penalties can be severe if you're caught. Plus, reporting your business properly builds tax history that helps with things like qualifying for loans, retirement accounts, and health insurance. The short-term tax hit is worth the long-term benefits of having everything properly documented.

There's also Section 179 deduction that lets you deduct the full cost of equipment in one year up to a certain amount. I think it's like $1,080,000 for 2023 so way more than most photographers would spend!

How much interest are we really talking about though? Like if someone gets a $3000 refund, how much are they actually losing by letting the government hold it?

The interest amount depends on what you would have done with the money instead. Using your $3000 example, if that refund built up gradually over the year (about $250/month): If you'd put it in a high-yield savings account at 3.5%, you'd have earned roughly $60 in interest over the year. Not life-changing, but it's something. If you used that monthly amount to pay down credit card debt at 18% interest, the impact would be much more significant - potentially saving around $300 in interest charges over the year. And if you invested it in the market with an average 7% return (obviously with more risk), that theoretical long-term value would be about $110 in potential growth. So it really depends on your personal financial situation. If you have high-interest debt, the cost of overwithholding is much higher than if you'd just park it in a savings account.

Isn't that just a result of how the withholding tables are designed though? Like they're intentionally set up to withhold a little extra so people don't end up with surprise tax bills? I don't think most people are consciously choosing to overpay.

That's a huge help! So this is entirely separate from my regular mortgage interest deduction that I claim every year? I definitely itemize and take that deduction.

Yes, completely separate things! The mortgage interest deduction is taken on Schedule A when you itemize, and that's what most homeowners use. You'll still get that. The Form 8396 credit is an entirely different benefit that only applies to people who received a special certificate through a first-time homebuyer program. If you never received a Mortgage Credit Certificate when you first bought your home, then Form 8396 simply doesn't apply to you. Just answer "no" to that question in H&R Block and continue claiming your regular mortgage interest deduction as you've been doing.

Good point! I completely forgot about this when I refinanced and ended up having to amend my return last year. Cost me an extra $120 for the amendment filing fee 😫

That's a bummer about the amendment fee! Yeah, it's one of those details that's easy to miss. Most tax software should handle it automatically if you enter everything correctly, but it definitely requires entering all your refinance details properly.

Thanks, that's super helpful! I just checked my 1099-DIV and you're right - box 3 (return of capital) has a pretty significant number. Does this mean I've been potentially paying taxes on money I didn't need to?

Return of capital distributions (box 3) are not immediately taxable - they reduce your cost basis in the ETF instead. So if you bought UCO at $10 per share and received $1 per share as return of capital, your new cost basis would be $9 per share. You only pay taxes on return of capital if it reduces your basis below zero (which is rare), or when you eventually sell the shares. If you've been treating these distributions as taxable income, then yes, you've been overpaying your taxes. You might want to consult with a tax professional about filing amended returns for previous years.

Be careful with tax-loss harvesting and wash sale rules though! If you sell something at a loss and buy a "substantially identical" security within 30 days before or after, you can't claim the loss. The IRS definition of "substantially identical" can be murky with ETFs.