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This is such a helpful thread! I've been in similar situations and really appreciate everyone sharing their experiences. One thing I learned recently is that you can actually check the status of a GoFundMe campaign before donating by looking at how it's set up. If you see "Beneficiary: [Organization Name]" instead of an individual's name, there's a good chance it might be tax deductible. Also, for those considering the church route - many churches have established benevolence funds specifically for situations like this. You could approach your church leadership about setting up a fund for community members facing medical or other hardships. That way your donations would be deductible, and the church could help people in your community (though as others mentioned, you can't earmark funds for specific individuals). Another option is looking into local community foundations - they often have emergency assistance programs and are definitely qualified organizations for tax purposes.
This is really great advice about checking the beneficiary information! I had no idea that was a way to tell if a GoFundMe might be tax deductible. The community foundation idea is brilliant too - I bet a lot of people don't even know those exist in their area. Do you happen to know if there's an easy way to find local community foundations? I'm thinking that could be a perfect middle ground for people who want to help their neighbors while still getting the tax benefits. It sounds like they might be more flexible than churches about helping specific types of situations.
Great question about community foundations @Amelia Dietrich! The easiest way to find local community foundations is through the Council on Foundations website - they have a "Find a Community Foundation" tool where you can search by zip code or city. Most major metropolitan areas have at least one, and many smaller communities do too. You can also try searching "[your city/county name] community foundation" on Google. Many of them have emergency assistance or hardship funds that are exactly what you're looking for - they help local residents with medical bills, housing emergencies, disaster relief, etc. Another tip: if you call 211 (the United Way helpline), they can often connect you with local foundations and other assistance programs in your area. They're like a one-stop resource for finding help and ways to give locally. The nice thing about community foundations is they often have faster response times than larger national charities, and your donations really do stay in your local community. Plus they usually have established relationships with local hospitals, service providers, etc., so they might be able to help your neighbors more effectively than you could individually.
This is incredibly helpful information! I had no idea about the 211 helpline - that sounds like such a valuable resource for finding local assistance programs. The community foundation route really does seem like the perfect solution for people who want to help locally while still getting tax benefits. I'm curious - do community foundations typically require a minimum donation amount? And when you donate to their emergency assistance funds, do they provide detailed receipts that clearly show it's going to qualified charitable purposes? I want to make sure I have proper documentation if I go this route for my tax deductions. Also, does anyone know if community foundations ever coordinate with GoFundMe campaigns? Like, could someone set up a GoFundMe that's actually managed by a community foundation to get the best of both worlds - the reach and ease of GoFundMe with the tax deductibility of a qualified organization?
Has anyone considered the W-2 wage limitation for QBI? Since OP is in the 24% bracket with joint income, they might face QBI limitations if they don't have sufficient W-2 wages. The deduction could be limited to 50% of W-2 wages paid by the business. Also for 2023, did you take any money out of the business? If so, the IRS might reclassify those as constructive dividends which wouldn't qualify for QBI. The cleanest solution might be filing an amended S-corp return showing reasonable compensation.
You're in a tricky spot, but it's not insurmountable. Since you didn't run payroll in 2023, you'll need to address this compliance issue head-on with your accountant. The IRS expects S-corp owner-employees to receive reasonable compensation through W-2 wages before taking distributions. Without proper payroll, you risk having all $71.5k treated as wages subject to employment taxes, which would eliminate the S-corp tax advantages. For QBI, the deduction applies to the business income AFTER reasonable compensation is paid. So if you can establish that $49k salary retroactively (through amended returns or other corrective measures your CPA recommends), the remaining income could potentially qualify for QBI. One silver lining: since your combined income keeps you in the 24% bracket, you're below the taxable income thresholds where QBI gets limited by W-2 wages or depreciable property. This means if you can properly separate salary from business income, you should get the full 20% QBI deduction on the qualifying portion. Document everything about your reasonable compensation analysis - industry standards, time spent, responsibilities, etc. This will be crucial for your accountant to determine the best path forward, whether that's amended returns, late payroll filings, or other compliance solutions.
This is really helpful context! I'm curious though - if OP's accountant recommends amended returns to establish the $49k salary retroactively, wouldn't that also trigger late payroll tax penalties and interest? And would the IRS question why they're suddenly amending to add payroll that wasn't there before? Just wondering how suspicious this might look from an audit perspective, especially since they already have a payroll company set up for 2024.
Don't beat yourself up too much about forgetting - you're definitely not the first person this has happened to! The good news is that since you're pretty sure you're owed a refund, you won't face any penalties for filing late. Just to add to what others have said: when you do mail in your 2021 return, make sure to use certified mail with a return receipt so you have proof the IRS received it. Keep copies of everything for your records too. One more thing - double-check that you actually didn't file anything for 2021. Sometimes people file and then forget, or maybe you filed an extension? You can request a tax transcript from the IRS website to see if they have any record of a 2021 filing under your SSN. Better to check now than accidentally file a duplicate return! Good luck getting your refund - hopefully it's a nice little windfall when it finally arrives!
Great advice about checking for previous filings first! I actually had a friend who went through all the trouble of preparing a late return only to discover they had already filed electronically and just forgot about it. The IRS transcript request is super easy to do online and could save a lot of unnecessary work. Also seconding the certified mail recommendation - with paper returns taking so long to process these days, having that proof of delivery is essential in case you need to follow up later.
I'm in a very similar situation - found my 2021 documents in a box last month and realized I never filed! Reading through all these responses has been super helpful. A few things I learned from my research that might help you too: First, definitely check if you already filed using the IRS transcript tool like TommyKapitz mentioned - I was paranoid I had filed and forgotten, but turns out I really hadn't. Second, if you're going the paper route, make sure you're using the correct 2021 forms from the IRS website, not current year forms. The tax tables and some rules were different back then. One thing I haven't seen mentioned yet - if you moved since 2021, make sure your current address is updated with the IRS before you file. You can do this online or by phone. Otherwise your refund check might get sent to your old address and you'll have even more delays. Also, don't forget to include any 1099s you might have received in 2021 - interest, dividends, freelance work, etc. It's easy to focus on just the W-2 and miss other income sources from that long ago. Hope this helps, and good luck with your refund! At least we're not alone in this mistake.
This is such a helpful checklist! I'm also dealing with a missed 2021 return and hadn't thought about the address update issue. I moved twice since then, so that's definitely something I need to fix before mailing anything in. One question - when you say "correct 2021 forms," are there specific form numbers I should be looking for? I want to make sure I'm not accidentally downloading a 2024 version of a form that might have changed since 2021. The IRS website has so many different years listed that it's a bit overwhelming to navigate. Also wondering if anyone knows whether the standard deduction amounts were different in 2021? I feel like they change every year but I can't remember if 2021 was significantly different from now.
This is such a valuable discussion! I work in HR and constantly get questions about state tax differences from our remote employees. One thing I'd add that hasn't been mentioned yet is that some states have reciprocity agreements that can complicate the picture. For example, if you live in Pennsylvania but work in New Jersey (even remotely for a NJ-based company), you might not owe NJ income tax thanks to their reciprocity agreement. But the specialty payroll taxes like disability insurance don't always follow the same rules. Also, I wanted to highlight something for anyone considering Washington state - while they don't have state income tax, their long-term care tax (WA Cares) is pretty unique. You can opt out if you have private long-term care insurance, but you have to do it during specific enrollment periods and provide proof of coverage. Once you opt out, you can never opt back in, even if you lose your private coverage later. For the original poster's table, you might want to add a column for "Special Considerations" to capture things like opt-out provisions, reciprocity agreements, and wage caps. These details can significantly impact someone's actual tax burden beyond just the basic rates. Has anyone dealt with the complexities of changing state residency mid-year while working remotely? The apportionment rules can get pretty complicated depending on where your employer is based versus where you're physically working.
This is such an important point about reciprocity agreements! I had no idea that these specialty payroll taxes might not follow the same rules as income tax reciprocity. That could really complicate things for remote workers. The Washington state long-term care opt-out situation sounds particularly tricky - having to make a permanent decision during specific enrollment periods with no ability to opt back in later seems like something that could really catch people off guard. Do you know if other states with similar programs have those same restrictions, or is Washington unique in that aspect? Your suggestion about adding a "Special Considerations" column is brilliant. There seem to be so many nuances beyond just the basic rates that could significantly impact someone's decision. Things like reciprocity rules, opt-out deadlines, wage caps, and implementation timelines for new programs. I'm curious about your question on mid-year residency changes too. If someone moves from California to Texas mid-year while working remotely for a California company, how do the apportionment rules typically work? Does it depend on where you're physically located when you do the work, or does the company's location matter more for payroll tax purposes? @429185180290 Thanks for bringing up these complexities - this is exactly the kind of real-world insight that makes this discussion so valuable!
This has been such an enlightening thread! I'm a tax attorney who specializes in multi-state issues, and I wanted to add a few important clarifications and additional states to help complete your comprehensive list. **Additional State Payroll Taxes to Consider:** **Connecticut**: 0.5% Paid Family and Medical Leave (employee portion) **Rhode Island**: 1.2% Temporary Disability Insurance + 1.1% Temporary Caregiver Insurance **New York**: ~0.5% for Disability Benefits Law + Paid Family Leave combined **Massachusetts**: 0.68% Paid Family and Medical Leave (increased for 2025) **Critical Points Often Overlooked:** 1. **Multi-state workers**: If you work remotely for an out-of-state employer, you generally pay taxes based on where you physically perform the work, NOT where your employer is located. However, some states have "convenience rules" (like NY) that can override this. 2. **Partial year residents**: When you move mid-year, most states prorate based on the actual days of residency/work location, but the calculation methods vary significantly. 3. **Reciprocity limitations**: As Lucas mentioned, reciprocity agreements typically only apply to income taxes. Disability, family leave, and unemployment taxes usually follow the work location state regardless of reciprocity. For your table format, I'd strongly recommend separating this into two tables: one for income tax ranges and another for mandatory payroll programs with specific rates. The mixing of progressive income taxes with flat-rate specialty taxes makes comparison difficult. Also worth noting: several states are currently debating paid family leave legislation for 2025-2026 implementation, including Michigan, Ohio, and Iowa. The landscape is definitely shifting rapidly!
This is exactly the kind of expert insight this discussion needed! Thank you for breaking down those multi-state complexities - the distinction between where your employer is located versus where you physically work is something I definitely didn't understand before. The point about New York's "convenience rules" is particularly concerning. Does that mean if I work remotely for a NY-based company but live in Florida, NY could still try to tax my income even though I'm physically working in a no-income-tax state? That seems like it could completely change the tax calculation for remote workers. Your suggestion to separate income tax ranges from flat-rate specialty programs makes a lot of sense. I've been getting confused trying to compare progressive rates with fixed percentages, and having them in separate tables would make the comparisons much clearer. Also really appreciate the heads up about Michigan, Ohio, and Iowa potentially adding paid family leave programs. For someone like me who's considering a move in the next year or two, knowing what's coming down the pipeline is crucial for making a good long-term decision. One question - when you mention that partial year residents get prorated based on actual days, is that something that happens automatically through payroll withholding, or is that something you have to sort out when filing your tax return? I'm trying to understand if there are any immediate paycheck impacts when someone moves mid-year versus year-end tax filing complications.
Aidan Hudson
Just a tip - if you already filed without including the 1099-R or without the proper penalty, you'll need to file an amended return. The IRS will definitely catch this since they get a copy of the 1099-R too, and you'll end up with penalties and interest if you don't fix it yourself.
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Zoe Wang
ā¢How long do you have to amend before they start adding penalties? I just realized I messed up something similar on my taxes from last year!
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The Boss
ā¢You generally have 3 years from the original filing deadline to amend a return without facing failure-to-file penalties, but if you owe additional taxes, interest starts accumulating from the original due date. For your situation from last year, you should definitely file the amended return ASAP to minimize interest charges. The IRS is pretty good about working with people who proactively fix their mistakes rather than waiting to get caught.
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Natalia Stone
Brianna, I feel your pain! Code J distributions can be stressful to deal with. Just to add to what others have said - make sure you keep good records of why you took the distribution and when. Even though moving expenses don't qualify for the penalty exception, having documentation helps if the IRS ever asks questions. One thing that might help for future reference - if you change jobs again and need cash, consider taking a loan from your 401k instead of a distribution. Loans don't trigger taxes or penalties as long as you pay them back on schedule. Obviously too late for this situation, but worth knowing for the future! Also, when you're calculating your taxes, don't forget that the $8,500 gets added to your regular income, so it might bump you into a higher tax bracket for the year. The penalty is definitely painful, but at least now you know what to expect when filing.
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