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Do I need to file Schedule M-2 for Form 1120-S if our company made under $250,000?
I'm going through our past S-Corp tax filings with our accountant and noticed something weird. For our first operational year, our accountant didn't complete Schedule M-2 on our Form 1120-S. When I asked about it, she said it wasn't required because our business income was under $250,000 that year. I've been trying to confirm if this is actually true, but I can't find anything in the Form 1120-S instructions that mentions this income threshold for Schedule M-2. I've googled it too but nothing specific comes up about a $250k exemption for Schedule M-2. I tried calling the IRS directly but got the runaround - they just told me to check their website (which I already did). The website isn't clear on this point either. Can someone who knows S-Corp tax filings confirm whether Schedule M-2 of Form 1120-S is actually optional for businesses with income under $250,000? Or should our accountant have been filling this out regardless of our income level?
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At what age are your children not able to be claimed as dependents on taxes?
Hey everyone, I'm trying to figure out this tax situation with my older kids. I have three children (19, 21, and 23) and I'm not sure if I can still claim them as dependents on my taxes this year. The oldest two are in college - one full-time and one part-time while working. The 19-year-old just started working full-time but still lives at home with me. I provide more than half of their support for all of them (housing, food, insurance, some tuition). I've heard different things from friends about age limits and income requirements. Some say it's 19, others say 24 if they're in school? I tried looking it up online but got confused with all the different rules about qualifying child vs qualifying relative. Does anyone know the cutoff age when I can no longer claim them? Also, does their income affect whether I can claim them or not? Filing season is coming up soon and I need to figure this out. Thanks!
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I just want to clarify something important about college students - the 5 month full-time requirement doesn't mean they need to be in school during the tax year for 5 months straight. It means they need to be enrolled full-time for what their school considers 5 months of the year (usually parts of 2 semesters). Also, make sure you're tracking ALL support - not just big items like tuition and housing. Things like health insurance, car insurance, cell phone plans, medical expenses, clothing, and food all count toward the support test. Parents often provide way more than they initially calculate.
Does scholarship money count toward the support test? My daughter got a partial scholarship that covers about 40% of her tuition. Does that mean I'm not providing enough support since I only pay the other 60% plus her housing and expenses?
Scholarship money generally doesn't count as support provided by your daughter - it's considered third-party support. What matters for the support test is comparing how much YOU provided versus how much SHE provided for herself. So if you're paying 60% of tuition plus housing, food, insurance, etc., you're likely still providing more than half of her total support even with the scholarship covering the other 40% of tuition. The scholarship actually helps your case since it means your daughter isn't using her own money to support herself!
This is such a helpful thread! I'm in a similar situation with my 20-year-old daughter who's in her sophomore year of college. She's full-time (taking 15 credits per semester) and I pay for her tuition, room and board, health insurance, and give her spending money. She works about 10 hours a week at the campus bookstore making maybe $3,000-4,000 per year. Based on what everyone's shared here, it sounds like I should be able to claim her as a dependent since she's under 24, is a full-time student, I provide way more than half her support, and she lives in the dorms (which counts as living with me). Her small income from the campus job shouldn't disqualify her from being my dependent, right? I'm planning to use some of the tools mentioned here like taxr.ai to double-check everything before I file. Thanks everyone for breaking down these confusing rules so clearly!
Yes, you're absolutely right! Your daughter definitely qualifies as your dependent based on what you've described. She meets all the criteria for a qualifying child: under 24 and a full-time student, lives with you (dorms count), and you clearly provide more than half her support. Her campus job income won't disqualify her at all - there's no income limit for qualifying children. Just make sure to keep good records of all the support you provide (tuition payments, room & board receipts, insurance premiums, etc.) in case you ever need to document it. And definitely coordinate with your daughter before filing to make sure she doesn't accidentally claim herself as independent on her own return if she needs to file one. That's been a common issue mentioned in this thread! Using taxr.ai sounds like a smart move to verify everything. Your situation seems pretty straightforward though - you should have no problem claiming her as a dependent.
Understanding and Interpreting Coinbase Pro CSV Reports for Tax Filing
So I'm trying to do my taxes for 2025 and I downloaded all my trade history from Coinbase Pro as a CSV file. I'm honestly completely lost. There are all these different columns and transaction types, and I have no clue what half of them mean or how I'm supposed to report this for my taxes. The CSV has columns for different transactions but I don't understand what counts as a taxable event vs just moving crypto around. I've been trading a bit of Bitcoin and Ethereum throughout the year, and did some other alt coins too. I need to figure this out before the tax filing deadline. Does anyone have experience with Coinbase Pro reports? Is there a guide somewhere that explains what all these transaction types mean and how to interpret them for tax purposes? I'm especially confused about the fees and how those factor into cost basis. Any help would be really appreciated!
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Has anybody just given up and hired an accountant who specializes in crypto? I'm looking at my Coinbase Pro CSV with hundreds of transactions and I'm about ready to throw in the towel lol. How much do crypto tax specialists typically charge for this kind of headache?
I hired one last year when I had similar issues. Cost me about $400 for around 200 transactions across 3 exchanges including Coinbase Pro. Worth every penny because I was doing it wrong for years before that. She found some losses I hadn't properly claimed too.
That's actually not as expensive as I expected! I was thinking it would be like $1000+. Did you just search for "crypto tax accountant" or something similar? I'm wondering how to find someone who really knows their stuff with these Coinbase reports.
I totally understand the frustration with Coinbase Pro CSV files - they're definitely not user-friendly for tax purposes! One thing that helped me was creating my own simplified spreadsheet where I broke down each transaction into just the basics: date, type (buy/sell), crypto amount, USD value, and fees. For the columns in the CSV, focus on these key ones: - "created_at" = transaction date - "side" = buy or sell - "size" = amount of crypto - "price" = price per unit - "fee" = trading fee - "product_id" = which crypto pair (like BTC-USD) The most important thing to remember is that every sale or crypto-to-crypto trade is a taxable event. Transfers to your own wallets are not taxable. Also, make sure to include fees in your cost basis calculations - they increase your basis when buying and reduce proceeds when selling. If you have a lot of transactions, honestly the crypto tax software options mentioned here are worth it. But if you want to do it manually, just take it one transaction at a time and don't try to tackle everything at once. Good luck!
How do capital gains tax work in Form 1040? Different tax rates for short vs long term?
I've been trying to file my taxes on my own this year and I'm getting really confused about capital gains reporting. So after I filled out Schedule D with both my short term and long term capital gains, it seems like I just add these numbers together and put the total in Form 1040? But that doesn't make sense to me. If I'm just putting in one total number on Form 1040, how does the IRS know which part should be taxed at the short term rate (which I think is the same as my income tax rate) versus the long term capital gains rate (which should be lower)? I sold some stocks I held for 3 years and some I only had for a few months. I thought these would be taxed differently! Where exactly on Form 1040 do I need to fill in information so that my regular income and short term gains get taxed at one rate, but my long term gains get that preferred tax rate? Am I missing something obvious here? This is my first time dealing with investment sales on my taxes.
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Another thing that might be confusing you is that some tax software doesn't clearly show you HOW it's calculating the different rates. When I use TaxAct, it looks like all my gains are lumped together on the Form 1040 preview screen, but when I look at the actual calculation detail sections, I can see it's properly separating short term vs long term behind the scenes. If you click through to the tax calculation details in whatever software you're using, you should be able to see the different tax rates being applied. The software is doing those worksheet calculations automatically even though the Form 1040 itself only shows the total gain.
That's really helpful! I'm using FreeTaxUSA and I just checked the detailed calculation section like you suggested. You're right - I can actually see where it's breaking down my gains by type and applying different rates! The main form just shows the total, but the calculation detail shows everything properly separated. That makes so much more sense now. Do you know if this is the same for all tax software or does each one handle it differently?
Most tax software handles it similarly - they all have to follow the same IRS rules, but the way they display the calculations might differ slightly. FreeTaxUSA, TurboTax, H&R Block, and TaxAct all do the calculations correctly behind the scenes, but some make it easier than others to see the detailed breakdown. TurboTax and H&R Block tend to have more detailed explanations and visual elements showing how different income types are taxed, while FreeTaxUSA and TaxAct sometimes hide those details in a tax calculation or summary section. The important thing is that all the major software programs are correctly applying the different tax rates to your different types of capital gains, even if it's not immediately obvious from the main form view.
One thing nobody mentioned - make sure you check if you qualify for the 0% long-term capital gains rate! If your total taxable income (including the capital gains) falls below $44,625 for single filers or $89,250 for married filing jointly in 2025, your long-term capital gains might be taxed at 0%. I didn't realize this my first year investing and overpaid my taxes. Had to file an amendment to get my money back.
Is that 0% rate only for federal taxes though? I live in California and I think they tax all capital gains as regular income at the state level regardless of how long I held the assets. So I might still owe state taxes even if my federal long-term rate is 0%, right?
You're absolutely right about California! The 0% federal rate only applies to federal taxes. California (and most other states) don't have preferential rates for long-term capital gains - they tax all capital gains as ordinary income at your regular state tax rate. So even if you qualify for the 0% federal rate, you'd still owe California state taxes on those gains at whatever your marginal state tax rate is. It's one of those frustrating situations where federal and state tax treatment can be completely different for the same income.
Accidentally Paid My Federal Taxes Twice - What Happens With The Overpayment?
I'm in a bit of a panic. I used H&R Block's e-file service to pay my federal taxes for this year. After submitting payment, I got nervous because there was no confirmation and I didn't see the withdrawal from my account right away. So I ended up using another payment processor to make sure my taxes got paid on time. Fast forward to today, and I just checked my bank account to find TWO separate withdrawals for exactly $2,874 each going to the IRS. Now I've essentially paid double what I owe! I've been trying to contact the IRS but all I get are automated systems. I can't seem to reach an actual human being. Does anyone know what happens with overpayments like this? Will they automatically refund the extra money? Do I need to file some special form? Is there a specific number I should call that might actually connect me to a person? I'm really stressed about this $2,874 that's just floating around in IRS-land. Any advice would be greatly appreciated!
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I completely understand your panic! This happened to me just last year during the April rush. I was using TurboTax and got nervous when the payment confirmation seemed to take forever to show up, so I ended up making a second payment through the IRS Direct Pay system "just to be safe." Here's what I learned from my experience that might help ease your anxiety: **The IRS handles this situation routinely** - Double payments are incredibly common during tax season, so they have established processes to deal with overpayments. You're definitely not the first person this has happened to! **Your money is safe** - Both payments should show up in your IRS account transcript within a few days to a week. You can check this by creating an online account at irs.gov and viewing your "Account Transcript." Seeing both payments listed there was hugely reassuring for me. **No special action needed** - When you file your return, just report your actual tax liability normally. Don't try to adjust for the double payment or file any special forms. The IRS system will automatically calculate that you overpaid and issue a refund for the excess amount. **Timeline expectations** - In my case, I got my overpayment refund about 6 weeks after filing my return. The "Where's My Refund" tool on the IRS website helped me track the progress. That $2,874 isn't lost in "IRS-land" - it's just temporarily parked in your account until they process your return and send it back to you. Try to breathe easy knowing that the system is designed to handle exactly this situation!
@Malik Robinson - This is exactly what I needed to hear! Thank you so much for sharing your experience. I ve'been absolutely panicking about this for days, constantly refreshing my bank account and imagining worst-case scenarios where the money just disappears forever. Your point about double payments being incredibly common during tax season really helps put this in perspective. I was feeling like I was the only person dumb enough to make this mistake, but it sounds like it happens to lots of people who are just trying to be responsible and make sure their taxes get paid on time. I m'definitely going to create that IRS online account today and check my account transcript. Just knowing that I can actually see both payments sitting there will probably eliminate 90% of my stress while I wait for everything to get processed. 6 weeks sounds totally reasonable for the timeline, especially knowing that it s'an automatic process once they detect the overpayment. I was worried it might take months or require me to file special paperwork or jump through hoops to prove I made duplicate payments. Thank you for taking the time to help reassure a fellow taxpayer. This whole thread has been incredibly helpful and I m'feeling so much more confident that everything will work out fine!
I completely feel your panic - this exact same situation happened to me two years ago! I was using FreeTaxUSA and got so anxious when I didn't see an immediate confirmation that I ended up making a second payment through my bank's online bill pay system. Here's what you need to know to calm your nerves: **This is extremely common during tax season and the IRS has streamlined processes to handle overpayments.** First, create an online IRS account at irs.gov if you don't have one already. Go to "Get Transcript Online" and pull your "Account Transcript" - this will show you both $2,874 payments once they're processed (usually within 3-5 business days). Seeing both payments listed there will give you immediate peace of mind that your money isn't lost. When you file your tax return, just file normally and report your actual tax liability. Don't try to adjust anything or mention the duplicate payment. The IRS system will automatically detect the overpayment during processing and issue you a refund for the excess amount. In my case, the overpayment refund took about 5 weeks from when I filed my return to when it hit my bank account. You can track the status using the "Where's My Refund" tool on the IRS website. The IRS is actually very reliable about returning overpayments because they're legally required to process them. Your $2,874 isn't floating around in limbo - it's safely in your IRS account waiting to be refunded once you file. Try not to stress too much, you'll definitely get your money back!
@Mia Roberts - Thank you so much for this detailed response! As someone who s'completely new to dealing with tax issues like this, it s'incredibly reassuring to hear from multiple people who have been through the exact same situation. I really appreciate you breaking down the specific steps - especially the part about checking the Account "Transcript online." I had no idea that was even an option! I ve'been calling the IRS phone lines for days and just getting stuck in automated menus, so having a way to actually see the status of my payments online sounds like a game-changer. The timeline you mentioned 5 (weeks also) sounds much more reasonable than what I was imagining. I was worried this could drag on for months or that I d'have to fight to prove I made duplicate payments. One question - when you say file "normally, does" that mean I should just enter my tax information exactly as if I had only made one payment? I m'using H&R Block and wasn t'sure if I needed to somehow account for or mention the duplicate payment in my filing. Thanks again for taking the time to help a stressed-out newcomer! This community has been incredibly supportive and I m'feeling much more confident that everything will work out.
Angelica Smith
Just to add some additional context - I'm a bookkeeper for several small S-Corps, and this Schedule M-2 confusion is actually really common. The 1120-S instructions could definitely be clearer about this. On page 1 of the instructions, it states: "A corporation with total receipts and total assets at the end of the tax year less than $250,000 is not required to complete Schedules L and M-1 and item F on page 1 of Form 1120-S." But it doesn't mention Schedule M-2 in this exemption because M-2 is still required. The reason is that M-2 tracks the Accumulated Adjustments Account (AAA), which is critical for determining the tax treatment of distributions to shareholders in future years. Without it, you could run into issues down the road if you make distributions.
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Logan Greenburg
Does this mean we need to file an amended return if our accountant didn't complete Schedule M-2? Or can we just start tracking the AAA now and include it in future returns?
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Angelica Smith
Whether to amend or not depends on your specific situation. If you made no distributions to shareholders in that first year and had minimal activity, you might be able to reconstruct the AAA balance and just ensure it's accurate going forward. However, if you had significant transactions affecting equity or made distributions, filing an amended return is usually the safest approach. The main risk of not amending is that without proper AAA tracking, future distributions might be incorrectly classified for tax purposes, potentially causing shareholders to pay more tax than necessary or triggering IRS questions down the line. I generally recommend discussing with a tax professional who can review your specific situation and advise on the best approach for your company.
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Charlotte Jones
Some of the answers here are complicating things unnecessarily. The simple answer is: YES, Schedule M-2 is required for all S-Corps regardless of size or income. What confuses people is that the instructions for Form 1120-S explicitly state that Schedules L, M-1, and certain balance sheet items are NOT required if total receipts and total assets are less than $250,000. But Schedule M-2 is NOT included in this exception. For a new S-Corp with minimal activity, completing M-2 is usually straightforward anyway. Just make sure it ties to your beginning/ending balances and accounts for any distributions or capital changes during the year.
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Lucas Bey
What would happen if someone hasn't been filing it though? My accountant hasn't completed it for my S-Corp for 3 years now!
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Fiona Gallagher
Not filing Schedule M-2 for 3 years is definitely a problem you need to address. The IRS could potentially flag this during an audit since it's a required schedule. More importantly, without proper AAA tracking, any distributions you've taken might not have been reported correctly on your personal tax returns. I'd strongly recommend working with a qualified tax professional to file amended returns for all three years. The longer you wait, the more complicated it becomes to reconstruct the AAA balances accurately. You might also face penalties for incomplete filings, though these are often waivable if you can show reasonable cause (like relying on professional advice). Don't panic, but definitely don't ignore this either. Many S-Corps have dealt with similar issues and gotten them resolved through amendments.
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