This is exactly what I needed! I've been avoiding the Tax Withholding Estimator because I wasn't sure about the gross vs. net pay question, but this thread cleared everything up perfectly. Just want to confirm what I'm understanding: I should use my gross pay (the full amount before ANY deductions) for both the "amount per pay period" AND the "year-to-date wages" fields, correct? My paystub shows $4,200 gross per pay period and $29,400 YTD gross - those are the numbers I should enter? Also, I have a 401k contribution that gets deducted pre-tax. From what I'm reading here, I should still use the full gross amount and then separately account for the 401k in the deductions section of the estimator, right? I don't want to mess this up like some of you did and end up with a surprise tax bill! Thanks everyone for sharing your experiences - this community is incredibly helpful for navigating these confusing IRS tools.

This thread is a goldmine of information! I've been struggling with the same confusion for weeks. Reading through everyone's experiences, I finally understand that I need to use my GROSS pay amounts consistently throughout the estimator. One thing I wanted to add that might help others - if you're like me and get confused by all the different numbers on your paystub, look for the line that says "Current Gross" or just "Gross" in the earnings section. That's typically the number you want for "amount per pay period." For the year-to-date amount, look for "YTD Gross" in that same section. I also learned from this discussion that timing matters. Since we're already partway through the year, the estimator is trying to figure out what you'll owe based on what you've already had withheld plus what will be withheld for the remainder of the year. Using the wrong numbers (like I was doing with net pay) really throws off these projections. Going to run through the estimator this weekend with my correct gross pay figures. Thanks to everyone who shared their stories - both the successes and the expensive mistakes!

I completely understand your frustration! As someone who's dealt with S-Corp filings for several years, I can confirm that yes, the penalties apply even when there's no tax liability. The $210 per shareholder per month penalty is automatic under IRC Section 6699. A few key points for your situation: - The penalty starts accruing from the day after the original due date (March 15th for calendar year S-Corps) - It applies for up to 12 months maximum - Drake should calculate this penalty, but definitely verify it manually One thing that might help your client: if they have a clean filing history for the past 3 years, they may qualify for first-time penalty abatement. Also, if there were legitimate circumstances that prevented timely filing (like their previous accountant's issues), they could potentially argue "reasonable cause" for penalty relief. My advice: file the current year return ASAP, and consider submitting a penalty abatement request with a detailed explanation of the circumstances. Even if partially successful, it could save your client hundreds or thousands in penalties.

One thing I'd add that hasn't been mentioned yet - make sure to check if your client's S-Corp election is still valid! If they've been filing late consistently, the IRS might have terminated their S-Corp status without them realizing it. This would mean they'd be taxed as a C-Corp instead, which creates a whole different (and much worse) penalty and tax situation. You can check this by looking at their Entity Classification Election status or calling the IRS Business & Specialty Tax Line. If the S-Corp election was inadvertently terminated due to late filings, you might need to file for relief under Rev. Proc. 2013-30 to get it reinstated. Also, since you're new to Drake for S-Corps, double-check that the software is properly calculating the penalty on the correct number of shareholders. I've seen cases where people forgot to account for spouse shareholders or missed shareholders who only held stock for part of the year. The penalty calculation can get tricky with mid-year ownership changes. Good luck with the filing! The penalties are harsh but there are definitely options for relief if you document everything properly.

As someone who's been through this process twice as an executor, I'd strongly recommend getting professional help for your first estate return, especially with that business liquidation involved. The business assets create complexity around depreciation recapture, inventory valuation, and proper timing of income recognition that can really trip you up. Here's what I'd suggest: get a consultation with a CPA who specializes in estates (not just any CPA - make sure they regularly handle Form 1041). Many will do an initial consultation for $200-300 where they can review your situation and give you a firm quote. With assets totaling around $640k including a business, you're looking at potential tax consequences that make professional guidance worthwhile. The peace of mind factor is huge too - as executor, you have fiduciary responsibility to handle things correctly. I made some costly mistakes on my first estate return trying to DIY it, and learned the hard way that estate tax rules are very different from personal tax rules. For subsequent years if the estate has ongoing simple income, then you might consider handling it yourself, but for this first year with the business complexity, invest in getting it done right.

I went through something very similar when I was executor for my dad's estate last year. With those asset values and especially the business liquidation, I'd definitely recommend starting with a CPA consultation. The business liquidation is where things get tricky - you'll need to deal with depreciation recapture, potential Section 1231 gains/losses, and proper valuation of business assets at the time of liquidation. These aren't things TurboTax walks you through very well, and getting them wrong can be expensive. What I did was hire a CPA for the first year (cost me about $1,100), and they also prepared a detailed memo explaining all the decisions made and why. This gave me a roadmap for understanding estate tax principles. Now that the estate is in its second year with just simple investment income, I feel confident handling it myself with TurboTax. One thing to keep in mind - estate returns are due by the 15th day of the 4th month after the end of the tax year (usually April 15th for calendar year estates), but you can get an automatic 5.5 month extension. Don't rush into a decision, but also don't let deadlines sneak up on you. The business liquidation timing could affect which tax year certain items need to be reported in.

Just to clarify, Form 5329 has multiple parts and isn't just for early distributions. It's also used for excess contributions to IRAs, excess accumulations (not taking RMDs), etc. So depending on your situation, you might need different parts filled out.

I ran into this exact same issue with Credit Karma Tax last year! The software can be really finicky about generating Form 5329. A few things that helped me get it to work: 1. Make sure you answered "Yes" when it asks if you received any retirement plan distributions 2. Double-check that you entered the correct distribution code from your 1099-R (should be code 1 for early distribution) 3. When it asks about the reason for the distribution, be very specific - don't just say "personal use" if that's what happened The form IS required for any early distribution, regardless of whether you qualify for an exception. If you do qualify for an exception, that's where you'd claim it on the form to avoid the 10% penalty. If Credit Karma still won't cooperate, you can always download Form 5329 directly from the IRS website and fill it out manually. Just make sure to include it with your return and transfer the additional tax amount to line 17 of your Form 1040. Sometimes the manual approach is actually easier than fighting with buggy software!

The timing confusion you're experiencing is really common! Since you spent the money in 2023 but didn't start generating income until 2024, you'll want to take the startup cost deduction on your 2024 tax return. The IRS considers your business to have "begun operations" when you first started providing services and earning income, not when you incurred the expenses. So you can deduct up to $5,000 of your startup costs directly on your 2024 return, and the remaining $2,200 would need to be amortized over 15 years starting in 2024. Don't amend your 2023 return - that would actually be incorrect since your business wasn't considered "active" yet according to IRS definitions. Make sure to keep all your receipts from 2023 as documentation for these startup expenses, even though you're claiming them in 2024. The key is when your business began operating, not when you paid for the expenses.

This is such a great question and the answers here are really solid! I went through the exact same confusion with my consulting business last year. One thing that might help clarify - the IRS Publication 535 has a section specifically on startup costs that breaks down the timing rules pretty clearly once you know what to look for. The key phrase is "begins business operations" which they define as when you start the activities for which your business was organized - so in your case, when you first started doing paid photography work in 2024. Even though you spent the money preparing in 2023, the deduction goes on your 2024 return. Also worth noting - keep excellent records of all those 2023 expenses because if you ever get audited, you'll need to prove both the amount and that they were legitimate startup costs. The IRS can be pretty strict about what qualifies versus what they consider personal expenses or regular business costs.