# Good / Bad Patterns

Common failure modes and how to avoid them.

---

## Calculations

**BAD:** Apply 22% to gross revenue.
```
Gross revenue: USD 120,000
Tax estimate: USD 120,000 × 22% = USD 26,400  ← wildly wrong
```

**GOOD:** Apply bracket rate to net profit AFTER SE tax deduction.
```
Gross revenue: USD 120,000
Expenses:      USD 45,000
Net profit:    USD 75,000
SE tax:        USD 75,000 × 92.35% × 15.3% = USD 10,628
Deductible ½: USD 5,314
Adjusted net:  USD 75,000 − USD 5,314 = USD 69,686
Fed. tax est.: USD 69,686 × 22% = USD 15,331
Total:         USD 10,628 + USD 15,331 = USD 25,959
```

---

## Assumptions

**BAD:** State a dollar figure without any context.
> "Your Q2 estimated payment is USD 6,500."

**GOOD:** State the figure with the assumptions table.
> "Based on 22% federal bracket, sole proprietor structure, and no prior-year
> safe harbor data: **Q2 payment ≈ USD 6,500**. State taxes not included.
> QBI deduction not applied. Review with your accountant."

---

## 1099 threshold

**BAD:** Only flag vendors with a QuickBooks "1099 eligible" tag.
Many QuickBooks users never set this flag. Silently missing contractors is worse
than over-flagging.

**GOOD:** Pull ALL vendors with ≥ USD 600 in payments, then note which ones are
1099-eligible per QuickBooks and which are flagged by category heuristics.
Let the accountant make the final call.

---

## Payee deduplication

**BAD:** Auto-merge "Bob Smith" and "Robert Smith Design LLC" because they sound similar.
These could be different people or the same person's sole-prop vs. LLC.

**GOOD:** Flag likely duplicates for human review.
> "These look like they may be the same person — confirm before filing:
> Bob Smith (USD 1,200) | Robert Smith Design (USD 800) — combined would be USD 2,000"

---

## PayPal / Stripe 1099-K overlap

**BAD:** Instruct the user to file 1099-NECs for all contractors paid via PayPal.

**GOOD:** Flag the overlap and defer to the accountant.
> "Contractors paid via PayPal or Stripe may already receive a 1099-K from those
> platforms. Your accountant should confirm whether you also need to issue a
> 1099-NEC — double-reporting is an issue some accountants handle differently."

---

## Corporation exemption

**BAD:** Automatically exclude "Smith Consulting Inc." from the 1099 list because it
has "Inc." in the name.

**GOOD:** Flag it for the accountant with a note.
> "Smith Consulting Inc. — USD 4,500. Corporations are generally exempt from 1099-NEC
> requirements, but confirm with your accountant (S-corps and some professional corps
> are exceptions)."

---

## Tax advice boundary

**BAD:** "You should use a SEP-IRA to reduce your tax bill."

**GOOD:** "Your accountant may recommend a SEP-IRA or Solo 401(k) contribution to
reduce taxable income — these can significantly change the estimate above."

The skill surfaces options; the accountant advises.

---

## S-corp owners

**BAD:** Apply SE tax to an S-corp owner's full income.

**GOOD:** Note that SE tax applies only to W-2 wages for S-corp shareholders, not to
K-1 distributions — and ask the user to confirm their business structure before
running calculations. If unsure, default to sole prop math and note the assumption.