Just wanna point out that an S corp with $1M profit should be maxing out retirement contributions too! You can put up to $68,000 in a Solo 401k for 2025 (that's $23,000 employee contribution plus 25% of your salary as employer contribution up to the max). This reduces your taxable income immediately. Also look into setting up a defined benefit plan if you're planning to have similar profits for several years. Our S corp was able to legally contribute over $200k annually to retirement this way, creating a massive tax deduction.

One thing I haven't seen mentioned yet is the potential for Section 199A deduction (QBI deduction) which can be huge for S corp owners. With $700K in pass-through income, you could potentially deduct up to 20% of that ($140K) if your business qualifies and you're under the income thresholds. However, there are some complexities with S corps and QBI - the deduction is generally based on your K-1 income minus your W-2 wages from the S corp. So if you take a $150K salary, your QBI would be calculated on $550K, potentially giving you up to $110K in additional deductions. The rules get tricky around the income limits and whether your business is a "specified service trade or business" (SSTB), but with proper planning this could save you tens of thousands. Your accountant should definitely be running these numbers for you, especially since you're right at the income levels where the phaseouts start kicking in.

Anyone know if salary calculation works differently for the first few paychecks? When I started my job last year, my first 3 checks were lower than expected, then it evened out. HR said something about "annualized withholding" but never really explained it.

This is exactly why I always recommend new employees check their first few paychecks carefully! Your girlfriend's situation is pretty typical. A few things that might explain the $43.97 difference: 1. **State taxes** - You didn't mention which state she's in, but most states have income tax that would reduce her take-home pay further. 2. **Payroll timing** - If she started mid-pay period, her first check might be prorated differently than your calculation assumes. 3. **Additional deductions** - Things like disability insurance, life insurance, or union dues that might not be obvious. 4. **Withholding method** - Employers sometimes use more conservative withholding calculations, especially for new hires, which would result in larger refunds at tax time. The good news is that if it's just over-withholding, she'll get that money back when she files her taxes. I'd suggest she check her paystub breakdown carefully and maybe ask HR about any deductions she wasn't expecting. Most payroll departments are happy to explain the calculations if you ask nicely!

Has anyone considered that the type of YouTube channel might matter? I have a gaming channel with income from both ads and gaming sponsorships. My tax preparer said the sponsorships are definitely Schedule C, but put the ad revenue on Schedule E since they're technically royalties from my existing content. Been doing it this way for 3 years with no issues.

This is exactly the kind of gray area that drives people crazy during tax season! I've been dealing with a similar situation with my old blog that still generates affiliate commissions. After years of going back and forth, here's what I've learned: The IRS generally looks at the "origin and character" of the income rather than your current level of activity. Since you originally created YouTube content as part of what was essentially a business venture (even if informal), the income retains that business character even when the channel goes dormant. I'd recommend sticking with Schedule C for consistency, especially since you've been filing it that way for 7+ years. The IRS tends to scrutinize sudden changes in income classification, and you could face questions during an audit about why you switched approaches. One silver lining: even with a dormant channel, you might still be able to deduct certain ongoing expenses like internet costs (percentage used for business), software subscriptions for video editing tools you maintain, or even a portion of your phone bill if you use it to monitor analytics. These deductions can help offset some of that self-employment tax burden. The peace of mind from consistent filing often outweighs the SE tax savings, especially at your income level where we're talking about maybe $200 in additional taxes.

Is anyone using PayPal instead of Venmo to avoid this whole mess? I heard they might have different reporting requirements?

I went through this exact situation last year and want to share what I learned to hopefully save others some stress. The key thing to understand is that getting a 1099-K doesn't automatically mean you owe taxes - it's just a reporting document. Here's what worked for me: I created a simple spreadsheet with columns for item sold, original purchase price (estimate if you don't have receipts), sale price, and notes. For most personal items, you'll find you're selling at a loss, which means no taxable income. The important part is being able to demonstrate these were personal items, not business inventory. Things like selling your old iPhone, clothes that don't fit, furniture you're replacing - these are clearly personal items. Keep photos of the items and any communication with buyers that shows the casual nature of the sales. When filing taxes, you report the 1099-K income but then document the corresponding basis (what you originally paid) to show the actual gain/loss. Most tax software handles this pretty well once you understand what you're doing. Don't try to game the system by splitting payments or avoiding the reporting threshold - it's not worth the risk and honestly, if you're just selling personal stuff at a loss, you don't need to worry about owing taxes anyway.

This thread has been incredibly helpful! As someone new to dealing with passive losses, I was making the same mistake as the original poster - looking at the 1040 and wondering why the form seemed to allow offsetting when the tax rules said it shouldn't. The explanation about Form 8582 acting as a "gatekeeper" before amounts even reach Schedule 1 finally made it click for me. I've been staring at my tax software wondering why my rental property losses weren't reducing my W-2 income, and now I understand it's actually working correctly by applying the limitations upstream. One thing I'm curious about - for someone just starting out with rental properties, is there a good rule of thumb for estimating how much in passive losses you might be able to use each year? I'm trying to plan ahead for next year's taxes and figure out if I should expect most of my depreciation and other deductions to get suspended.

This discussion really highlights how the tax code creates these seemingly contradictory situations! I've been teaching tax prep courses for volunteers, and this passive loss limitation concept is always one of the hardest things for new preparers to grasp. What I tell my students is to think of it like airport security - just because you bought a plane ticket doesn't mean you automatically get on the plane. Your passive losses might have a "ticket" to Schedule 1, but they have to pass through the Form 8582 "security checkpoint" first. Only the losses that clear security actually make it onto the form. The real challenge comes when you're using tax software that automates all this. The software correctly applies the limitations, but it doesn't always show you WHY certain losses didn't make it through. That's why manually working through Form 8582 at least once (even if you use software) can be incredibly educational for understanding how the limitation actually works. For anyone dealing with multiple rental properties or other passive activities, I'd also recommend keeping a simple spreadsheet tracking your suspended losses by activity. It makes tax planning much easier when you can see at a glance what you've got "banked" for future use or property sales.