Something nobody mentioned yet - watch out for the personal use portion of any vehicle expenses! If your S Corp reimburses you for 75% of costs based on business use, make sure you're personally paying for the other 25% directly. Don't run personal vehicle expenses through the business. I made this mistake and had some distribution reclassified as taxable compensation during an audit. They were particularly interested in my vehicle reimbursements and documentation. The accountable plan rules are strict - it must be for business expenses only, within a reasonable time period, and any excess reimbursements must be returned.

Great thread! I'm dealing with this exact scenario and have learned a few things that might help others. One thing I'd add is about timing - make sure your S Corp reimburses you within a reasonable time period (IRS generally considers 60 days reasonable) after you incur the expenses to maintain the accountable plan status. Also, for the business use percentage calculation, I highly recommend using a GPS-based mileage tracking app rather than manual logs. I use MileIQ which automatically tracks all my trips and I just categorize them as business or personal. This creates bulletproof documentation that's much more reliable than handwritten logs, and it timestamps everything automatically. The key is consistency - whatever method you use to calculate your business percentage, stick with it throughout the year. Don't cherry-pick high business use months for reimbursement calculations. The IRS wants to see a systematic approach that reflects your actual business usage patterns.

Great question! I went through this exact same situation with my LLC last year. The key thing to understand is that guaranteed payments are treated as self-employment income for tax purposes, but the mechanics of how the money flows can be flexible. Your LLC can absolutely withhold the $1,000 for your 401(k) contribution directly from the $12,500 guaranteed payment and remit it to the plan, then pay you the remaining $11,500. This is actually preferable from a cash flow perspective and keeps everything clean administratively. The 401(k) plan administrator generally doesn't care about the source - they just need to receive the contribution and proper documentation. What matters for tax purposes is that the full $12,500 still gets reported as guaranteed payments on your K-1, regardless of whether $1,000 went directly to your 401(k) or through your personal account first. Just make sure your operating agreement is clear about this arrangement, and that your bookkeeper properly tracks the full guaranteed payment amount for tax reporting. The IRS views the entire $12,500 as taxable guaranteed payment income to you, even though part of it went directly to retirement savings.

One thing I'd add to this discussion is the importance of getting your payroll provider on board early if you use one. We ran into issues initially because our payroll company wasn't familiar with processing 401(k) contributions from guaranteed payments. They kept trying to treat it like regular employee payroll with tax withholdings, which created a mess. We had to educate them that guaranteed payments are already subject to self-employment tax, so there's no additional payroll tax withholding needed - just the straightforward transfer to the 401(k) plan. Also, make sure you coordinate the timing with your plan's contribution deadlines. Most plans require contributions to be made within a reasonable time after the guaranteed payment date. We typically process ours within 5 business days of issuing the guaranteed payment to avoid any potential issues with the Department of Labor's timing requirements. The bookkeeping approach Carmen mentioned is spot-on - that's exactly how we handle it and it keeps everything clean for tax reporting.

Just wanted to add - make sure you keep copies of EVERYTHING related to your nondeductible contributions forever (or at least until you've withdrawn all the money). I learned this the hard way. I had made nondeductible contributions years ago, filed my 8606 forms properly, but then lost track of the paperwork during a move. When I started taking distributions years later, I couldn't prove my basis to the IRS and ended up paying tax on money that should have been tax-free coming out. The burden of proof is 100% on you to track your nondeductible basis, not on the IRS. They don't keep easily accessible records of your basis year to year.

Great advice from everyone here! I went through this exact situation last year when I discovered I had missed filing Form 8606 for multiple years of nondeductible contributions. One thing I'd add that helped me tremendously - when you mail your Form 8606, use certified mail with return receipt requested. The IRS can be slow to process these forms, and having proof of delivery gives you documentation that you filed it timely (even though it's late for the original tax year). Also, consider keeping a detailed log of all your IRA transactions going forward. I created a simple spreadsheet that tracks: - Date of contribution - Amount contributed - Tax year it applies to - Whether it was deductible or nondeductible - Form 8606 filing status This has made my annual tax prep so much easier and ensures I never miss tracking my basis again. The few hours spent organizing this information upfront saves tons of stress later, especially if you ever need to prove your basis to the IRS during an audit or when taking distributions. Your numbers look correct for the 2022 form, and yes, you should include the full $15,500 basis on your 2023 Form 8606 even if the 2022 form hasn't been processed yet. The key is that you're filing it before or with your 2023 return.

Has anyone dealt with Canadian RRSP accounts when making the first-year choice? I've heard there's a special form you need to file to avoid the US taxing these accounts as regular investment income.

I went through this exact same situation when I moved from Toronto to Austin in September 2024! The first-year choice election was definitely the way to go - it saved us thousands compared to filing as non-residents. A few things to keep in mind that I learned the hard way: Make sure you calculate the 31 consecutive days and 75% presence test carefully. Since you arrived in August, you should easily meet this. Also, don't forget that making this election means you'll be considered US residents from January 1, 2024 forward for tax purposes, so you'll need to report ALL worldwide income including your Canadian employment from early in the year. The foreign tax credit on Form 1116 will help offset the Canadian taxes you already paid, but gather all your Canadian tax documents (T4s, Notice of Assessment, etc.) because you'll need them. One tip: if you had any Canadian investment accounts (TFSAs, RRSPs, etc.), there are additional forms and elections to consider. The US-Canada tax treaty has some helpful provisions but you need to be proactive about making the right elections. Filing jointly with the full standard deduction made a huge difference for us compared to the non-resident alternative. Definitely worth consulting with someone who knows cross-border tax if you have a complex situation, but the first-year choice sounds perfect for your circumstances.

As someone who's been researching both programs extensively, I really appreciate everyone sharing their real-world experiences here! This thread has been incredibly valuable for understanding the practical differences beyond what you see in the marketing materials. One thing that strikes me is how much the local franchise/office quality seems to matter. Several people mentioned that Liberty locations can vary significantly in their professional setup (office vs. mall kiosk) and advancement opportunities. This makes me think it might be worth visiting both local options in person to get a feel for the specific work environment and management style, not just comparing the corporate training programs. I'm particularly intrigued by the hybrid approach that keeps coming up - getting that solid theoretical foundation from one program and practical software skills from another. It seems like this could create a really well-rounded skill set that would be valuable regardless of where you end up working long-term. The VITA program suggestion is also something I hadn't considered before. Having that additional volunteer experience plus the IRS-certified training could really set someone apart when applying for positions or building client trust. For Maya and others in similar situations - it sounds like the key is being honest about your learning style and career goals rather than trying to force a program that isn't clicking. The investment in proper training is too important to compromise on just because you've already started somewhere. Has anyone looked into whether completing both programs (even if at different times) would be valuable, or would that be overkill for most tax prep positions?

This has been such an incredibly helpful thread! As someone who's also considering both programs, I really appreciate all the detailed experiences and insights everyone has shared. What really stands out to me is how much the decision seems to depend on individual learning preferences and career goals. The consensus seems to be that Liberty's manual approach builds stronger theoretical foundations (which could be valuable long-term), while H&R Block's digital approach gets you job-ready faster and offers better advancement opportunities. Maya, given your situation with the teaching style not clicking, I'd echo what several others have said about trusting your instincts. Amina's experience of successfully switching mid-course is really encouraging - it shows that H&R Block can be flexible about these situations. The hybrid approach that keeps coming up sounds brilliant - finishing Liberty for that solid foundation, then potentially adding H&R Block's software skills later. As Isaac mentioned, the fundamentals you're building now will transfer regardless of which software you eventually use. I'm also really intrigued by the VITA program suggestion from Mikayla. Getting that additional volunteer experience while helping the community seems like a perfect complement to either commercial program. One practical tip: Yuki's suggestion about sitting in on an H&R Block session before deciding sounds like a no-brainer. Even if you decide to finish with Liberty, you'd at least know what you're missing (or not missing). Whatever you decide, it sounds like both paths can lead to success - the key is finding what works best for your learning style and goals!