I'm in a very similar situation and this thread has been a lifesaver! My husband and I have been filing Schedule C for our LLC for the past two years, completely unaware that we needed to file Form 1065 as a partnership. After reading everyone's experiences, I have a couple of specific questions: 1. When filing the late Form 1065, do you need to pay the partnership filing fee for each year, or are there any waivers available for first-time filers who made honest mistakes? 2. Has anyone dealt with state-level implications? We're in California and I'm wondering if we need to file corrected state partnership returns as well, or if this is just a federal issue. 3. For the amended personal returns (1040-X), how long did it typically take to get your refunds processed? Since we'll be removing Schedule C income and adding K-1 income, I'm hoping there might be some refund due to different deduction treatments. I'm planning to be proactive about this like many of you recommended, but want to make sure I understand all the moving pieces before I start filing corrections. The penalty abatement options you've mentioned give me hope that this won't be as financially devastating as I initially feared!

I've been following this thread closely as I'm dealing with a similar situation. My husband and I have had an LLC for three years and just realized we've been filing everything wrong with Schedule C instead of Form 1065. One thing I wanted to add that might help others - when you're preparing your reasonable cause letter for the IRS, be very specific about WHY you made the mistake. Don't just say "I didn't know" - explain exactly what led to the confusion. For example: "As first-time LLC owners, we relied on [specific tax software] which automatically directed us to Schedule C filing without asking about the number of LLC members or explaining partnership filing requirements for multi-member LLCs." Also, I've noticed several people mention First-Time Penalty Abatement, which is great, but remember you can only use this once every three years and only if you've been compliant with filing and payment requirements for the prior three years. If you've had other tax issues recently, you might not qualify. For those worried about the complexity - I started trying to handle this myself but quickly realized I was in over my head with multiple years of corrections. Ended up hiring a CPA who specializes in small business taxes and it's been worth every penny for the peace of mind alone. The key takeaway from everyone's experiences here seems to be: act fast, be proactive, and don't try to hide from the IRS. They're surprisingly reasonable when you come to them first with a good explanation and a plan to fix things.

Quick question - does anyone know if the company has to issue a 1099 for these rewards if they don't put them on the W-2? I got about $300 in gift cards from my company's similar program last year and never received any tax forms for it.

I've been through this exact situation with my employer's rewards program! The key thing to understand is that these rewards are considered "supplemental wages" by the IRS, which means they should be subject to withholding just like your regular paycheck. What's concerning is that your employer isn't including these on your W-2 - they're actually supposed to withhold taxes on the fair market value when you redeem the rewards, not just report it at year-end. This means you might end up owing more taxes than expected since no withholding was taken out. For the $200 gift card you already received, you should report it as "Other Income" on Line 8i of Form 1040 for the year you received it. For the upcoming $650 vacation package, do the same when you actually redeem those points. Keep documentation of the fair market values in case the IRS ever questions it. I'd also suggest talking to your HR department about proper tax handling going forward - they might not realize they're supposed to be withholding on these benefits.

Don't forget about the business use requirement! For Section 179 and bonus depreciation, the asset must be used more than 50% for business. You mentioned 100% business use, so you're good, but make sure you keep detailed records proving that. If the IRS audits you and finds personal use, they can disallow your deductions. Also, have you calculated the actual dollar difference between the two depreciation options? With bonus depreciation dropping from 80% in 2024 to 60% in 2025, there could be a significant advantage to placing it in service this year if possible.

This is a complex situation that really highlights why timing matters so much with tax planning! Based on what everyone has shared, it sounds like you have a few key decisions to make: 1. **Payment timing vs. "placed in service" timing** - As others mentioned, what really matters is when you place the RV in service (available for business use), not necessarily when you pay for it. If you can purchase and list it in December 2024, you could potentially benefit from the higher 80% bonus depreciation rate. 2. **Consider your overall tax situation** - Since you mentioned having a day job, you'll want to think about whether taking a large depreciation deduction in 2024 actually benefits you tax-wise, or if spreading it out might be better. 3. **Don't forget about the recapture risk** - @Sophia Clark raised an excellent point about the 5-year recapture period. If there's any chance you might exit this business or sell the RV within 5 years, regular MACRS depreciation could be safer than the aggressive front-loaded options. Given that you need to decide quickly and haven't found a CPA yet, I'd suggest either using one of the tools mentioned (taxr.ai for analysis or Claimyr to speak directly with the IRS) or at minimum, run some quick calculations on the actual dollar differences between your options. The cash flow benefit of splitting payments might outweigh the tax benefits, especially if you're not certain about the long-term viability of the rental business. Sometimes the bird in the hand (better cash flow) is worth more than the potential tax savings!

Maybe try reaching out to your local congressperson's office? They sometimes have ways to expedite IRS issues for constituents.

I've been dealing with similar issues! What worked for me was calling the practitioner priority line (if you have a tax pro helping you) or trying the automated callback feature - you can request a callback instead of staying on hold. Also, for transcript errors, try accessing them through different browsers or clearing your cache. Sometimes it's just a technical glitch on their website. The IRS2Go mobile app sometimes works better than the website too. Don't give up - I know it's super frustrating but you'll get through eventually!

Great discussion here! Just wanted to add another perspective as someone who's been running an S Corp for 5 years. The salary vs distribution strategy really does work, but documentation is key. I keep detailed records showing how I determined my "reasonable salary" - industry salary surveys, job postings for similar roles, and notes from my accountant. One thing I learned is to be conservative in your first couple years. The IRS seems to pay more attention to newer S Corps, especially those with large distribution-to-salary ratios. I started with a higher salary percentage and gradually optimized it as my business matured. Also, make sure your corporate formalities are solid - separate bank accounts, proper board resolutions, etc. The IRS is more likely to respect the S Corp structure if you actually treat it like a corporation. The tax savings are real though - I save about $8,000-10,000 annually in self-employment taxes compared to when I was a sole proprietor.

As a tax professional, I want to emphasize something that's been touched on but bears repeating: the "reasonable salary" requirement is absolutely critical and the IRS takes it seriously. I've seen too many S Corp owners get into trouble by trying to minimize their salary too aggressively. For web design services at your revenue level, $65K is likely in a good range, but you should document how you arrived at that number. Look at Bureau of Labor Statistics data, industry salary surveys, and local job postings for similar roles. The IRS uses a "facts and circumstances" test that considers your education, experience, time devoted to the business, duties performed, and what an independent third party would pay for the same services. One red flag the IRS watches for is a very low salary relative to distributions - if you're paying yourself $30K but taking $120K in distributions, that's going to raise eyebrows. Your current split seems reasonable. Also remember that reasonable compensation can change as your business grows - if you're generating significantly more revenue in future years, your salary should probably increase accordingly. The tax savings are real and legitimate when done properly, but always err on the side of caution with salary levels. The penalties for getting it wrong can be substantial.