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One thing nobody's mentioned yet - the complexity really depends on the nature of your business too, not just the form. My experience: S-Corp: Relatively straightforward but payroll requirements (reasonable compensation) can be a pain. 1065 Partnership: Moderate difficulty but gets exponentially harder with multiple partners, special allocations, or guaranteed payments. C-Corp: Most complex overall, but if it's a simple operation without international components or AMT issues, it might not be that bad. Honestly though, for most small businesses, the S-Corp or partnership usually makes more tax sense anyway unless you have specific reasons for a C-Corp.
What about if you're planning to seek outside investors? Does that change which one is better from a complexity standpoint?
For outside investors, a partnership (LLC filing 1065) usually provides the most flexibility while keeping things relatively manageable complexity-wise. You can create different classes of membership with varying rights, which appeals to investors. S-Corps have restrictions on ownership (limited to 100 shareholders, must be US citizens/residents, etc.) and only allow one class of stock, which significantly limits your funding options. C-Corps remove these restrictions and are the standard for major investments, but come with that higher complexity and potential double taxation.
don't forget about the schedule C option if your just starting out! way simpler than any of these business returns, just attaches to your 1040. might be all you need if your a one-person operation and don't need liability protection.
One thing nobody mentioned - this is a great opportunity to teach your teen about taxes! I helped my 15yo file his first return last year, and we turned it into a financial literacy lesson. We talked about tax brackets, withholding, and why we pay taxes at all. He was much more interested since it was HIS money at stake! Now he checks his paystubs and understands what all the deductions mean.
This is such great advice from everyone! I'm dealing with the same situation with my 17-year-old who worked at a restaurant over the summer. One thing I learned that might help - even though the filing threshold is $13,850, if your daughter had ANY federal taxes withheld (which it sounds like she did based on other comments), she should definitely file to get that money back. Also, when you do file her return, make sure to check the box that says "Someone can claim me as a dependent" - this is super important to avoid any conflicts with your family return. The IRS systems will cross-reference and you don't want any red flags. I used TurboTax's free version for my son's simple W2 return and it walked us through everything step by step. Took maybe 30 minutes total and he got his $180 refund direct deposited in about 2 weeks. Definitely worth doing!
That's really helpful about checking the "Someone can claim me as a dependent" box! I hadn't thought about the IRS cross-referencing systems but that makes total sense. The last thing I want is to trigger some kind of audit or review because of a checkbox mistake. Did you have to create a separate account for your son in TurboTax, or were you able to handle both returns under your main account? I'm wondering about the logistics of managing multiple tax returns for the same family.
I just went through this exact same situation a few weeks ago and was pulling my hair out! The key thing that finally clicked for me is that TurboTax's question is really poorly worded. When they ask for "previous year tax liability from Form 2210," they're NOT asking for a Form 2210 that you filed last year (most people never file this form). What they actually need is your total tax from last year's Form 1040, line 24. This number helps TurboTax determine if you need to file Form 2210 THIS year for underpayment penalties, and whether you qualify for safe harbor protection. I was making the same mistake of looking for a Form 2210 I never filed instead of just using the tax liability amount from my regular 1040. Once I entered the line 24 amount, everything worked perfectly and TurboTax moved on to the next section. Don't overthink it - just use that number from line 24, even if it seems too simple!
This is such a relief to read! I've been staring at TurboTax for hours trying to figure out what they're asking for. The wording really is terrible - it makes it sound like Form 2210 is something everyone files every year. I was convinced I must have missed filing some important form last year. Your explanation about using line 24 from the regular 1040 makes so much more sense. I'm going to go grab my old tax return right now and find that number. Thanks for saving me from more frustration!
I'm dealing with this same confusion right now! Thank you everyone for the detailed explanations - I was getting so frustrated with TurboTax's confusing wording. I kept searching through my files for a Form 2210 that doesn't exist because I thought I had missed filing something important last year. After reading all your responses, I found line 24 on my 2024 Form 1040 and it does have an amount there. It's such a relief to know that's all TurboTax is asking for, not some mysterious form I never filed. The safe harbor explanation really helps me understand WHY they need this information too - it's not just a random question but actually serves a purpose for calculating potential penalties. Going to enter that line 24 number right now and hopefully get past this roadblock. Really appreciate this community for breaking down such a confusing tax concept!
14 This QBI stuff is honestly one of the most confusing parts of the tax code. Has anyone found any good resources that explain it in plain English? I'm still not sure if my business even qualifies.
16 Check out IRS Publication 535, specifically the QBI section. It's still tax language but clearer than most sources. The basic requirements are: you must have income from a qualified trade or business, be a sole proprietorship, S-corp, partnership, or LLC, and your taxable income must be under certain thresholds for the full deduction.
I just want to add my experience for anyone still struggling with this. After reading through all these comments, I ended up calling the IRS directly (took 3 hours on hold!) and spoke with a representative who confirmed everything mentioned here. The key points that helped me: 1. Statement A-QBI is NOT a pre-printed IRS form - you create it yourself 2. Use the format suggested earlier with business name, EIN, ownership %, QBI amount, W-2 wages, and qualified property 3. The statement should be clearly titled and include your identifying information 4. Attach it to your return when claiming the QBI deduction I also learned that if you have multiple businesses, you need to list each one separately unless you've made a proper aggregation election. The IRS agent stressed that documentation is key - they want to see your work clearly laid out in case of an audit. For what it's worth, I ended up creating a simple spreadsheet format that I printed out, and it worked perfectly for my filing. Sometimes the simplest approach is the best!
Thanks for sharing your experience! It's really helpful to hear confirmation from someone who actually spoke with the IRS directly. I'm a newcomer to this community and dealing with QBI for the first time with my small consulting business. Your point about documentation being key for audits is especially valuable - I hadn't really thought about how this would look from an auditor's perspective. The spreadsheet format sounds like a great approach that would be clear and professional. One quick question: when you say "proper aggregation election," do you know if that's something that needs to be filed separately or can it be done as part of the regular return? I have a few different income streams that might qualify and I'm trying to figure out the best way to handle them.
Welcome to the community, Leila! Great question about aggregation elections. From what I learned during my IRS call, the aggregation election is typically made on your tax return itself - you don't need to file a separate form. However, you need to meet specific requirements like having common ownership and either integrated operations, similar businesses, or shared facilities/personnel. The IRS agent mentioned that if you're eligible to aggregate, you'd include a statement with your return explaining the basis for aggregation and then list the aggregated businesses as a single line on your Statement A-QBI rather than separately. But if you don't meet the strict aggregation requirements, you definitely want to list each income stream separately to avoid any issues. Given that it's your first time dealing with QBI, you might want to consider keeping them separate this year unless you're confident they meet the aggregation rules. It's generally safer to be more detailed than less when it comes to IRS documentation. The extra paperwork is worth avoiding potential audit questions down the road!
Connor O'Neill
As someone who's been through this exact situation, I'd recommend getting organized now for next year's tax filing. Beyond just reporting the $1200 win, make sure you understand your state's rules too - some states have different thresholds or treatment for gambling winnings. One practical tip: if you're planning to gamble more this year, consider setting up a separate bank account just for gambling transactions. Deposit your gambling budget there and only use that account for casino/gambling expenses. This creates a clear paper trail that makes tracking wins and losses much easier come tax time. Also, don't forget that even smaller wins under $1200 are still technically taxable income - the casino just isn't required to issue a W-2G or withhold taxes. If you have a lucky streak with multiple smaller wins that add up, you're supposed to report those too. Most people don't realize this! The good news is that $1200 is a nice win but shouldn't create a huge tax burden. Just budget for it and enjoy the extra cash you get to keep after taxes!
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Javier Garcia
ā¢This is excellent advice about setting up a separate gambling account! I never thought of that but it makes total sense - would make tracking so much easier. Quick question though - when you say "smaller wins under $1200 are still taxable," how realistic is it that the IRS would ever know about those? Like if I win $500 on slots, there's no paperwork trail, right? Not saying I wouldn't report it (of course I would!), just curious how they'd even find out about smaller wins that don't trigger W-2G forms.
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GalaxyGuardian
Great question about the $1200 win! Just wanted to add something important that I learned from experience - make sure you get a copy of that W-2G form from the casino if they haven't already given you one. Sometimes the paperwork gets lost in the excitement of winning, but you'll absolutely need it for your tax return. One thing that caught me off guard was that gambling winnings are subject to self-employment tax in some situations if you're considered a "professional gambler" by the IRS. For a one-time $1200 win, this definitely won't apply to you, but it's worth knowing if you start winning more regularly. Also, regarding your $800 in losses - even if you can't deduct them this year due to documentation issues, it's a good reminder to start keeping detailed records now. I learned this lesson the expensive way! Consider it tuition for "gambling tax school" and you'll be much better prepared if lightning strikes twice. Congrats on the win though - $1200 is a nice score! Just set aside about 25-30% for taxes (depending on your bracket) and you'll still have a nice chunk of fun money left over.
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