Something nobody has mentioned yet - make sure you have a clear business plan and documentation showing your intent to make a profit! If you claim business losses for too many years, the IRS might reclassify your business as a hobby, which would disallow your deductions. This isn't an issue in your first year at all, but keep good records showing efforts to generate revenue, marketing attempts, business development, etc. The IRS generally looks for profitability in 3 out of 5 years for most businesses (5 out of 7 for horse-related businesses, oddly enough).

I'm dealing with a similar situation with my new consulting LLC! Reading through all these responses has been incredibly helpful. One thing I want to add from my recent experience - when you do file your Schedule C with losses, make sure you keep EXCELLENT records of everything. I just went through this process and learned that the IRS is particularly interested in seeing that new businesses are legitimate profit-seeking ventures, not hobbies. Beyond just keeping receipts, document things like: - Your business plan and revenue projections - Marketing efforts (even if unsuccessful initially) - Time logs showing hours worked on the business - Any client outreach or networking activities Even though you're totally allowed to claim losses in year one (despite what that H&R Block preparer told you!), having this documentation ready shows the IRS you're running a real business. It also helps if you ever get questioned about the hobby loss rules that others mentioned. The equipment expenses you mentioned should definitely be deductible - either through Section 179 immediate expensing or regular depreciation. Don't let anyone tell you otherwise!

One thing nobody mentioned yet - there's also the "testing period" option with HSAs. If your husband is covered by the HDHP on December 1st, he can potentially contribute the FULL annual amount ($4,150 minus the FSA contribution) even though he only had the HSA for part of the year. BUT - and this is a huge but - he would need to remain eligible (covered by a HDHP) for the entire following calendar year. If he doesn't, there's a penalty and that "extra" contribution becomes taxable income plus a 10% penalty. It's called the "last-month rule" or sometimes the "full-contribution rule.

Just to clarify something important: there's a difference between needing to reduce your HSA contribution because of an FSA and what happens with a limited-purpose FSA. If your husband's previous FSA was a regular medical FSA, then yes, you need to reduce the HSA max by $500. However, if by chance it was a limited-purpose FSA (only for dental and vision), then no reduction is required. You might want to double-check what type of FSA it was, just to be certain. Most are regular medical FSAs, but it's worth confirming.

One thing nobody has mentioned is setting up an HRA (Health Reimbursement Arrangement) which can be another tax advantage when hiring family members. If you have an eligible plan, you can reimburse certain medical expenses tax-free.

This is such a valuable discussion! I've been considering this strategy for my 9-year-old daughter who already helps organize my home office. Reading through all these experiences gives me confidence to move forward. A few additional considerations I'd add based on my research: Make sure you're paying your child a reasonable wage for their age and the work performed - not minimum wage for simple tasks a 10-year-old would do. The IRS looks for "reasonableness" so paying $20/hour for filing might raise red flags. Also, consider the timing of payments. If you pay your child sporadically or in large lump sums, it might look suspicious. Regular bi-weekly or monthly payments look more like legitimate employment. One question for those who've implemented this: How do you handle the transition from unpaid chores to paid work? I'm worried about creating the expectation that all household help should be compensated, but I want to clearly distinguish between family responsibilities and legitimate business work.

Don't forget about state-specific requirements! I'm in California and there are additional state payroll tax requirements for S Corps that weren't obvious when I first started. Each state has different rules about unemployment insurance, disability insurance, etc. Make sure whatever payroll system you choose handles your specific state's requirements.

This is exactly the situation I went through 8 months ago when I converted to S Corp! The learning curve is steep but totally manageable once you get the basics down. A few key points that helped me: 1. **Payroll frequency matters**: Don't wait until year-end - I do monthly payroll which keeps things simple and looks legitimate to the IRS. Set a consistent schedule and stick to it. 2. **Reasonable salary research**: For software development, I used sites like Glassdoor, PayScale, and Bureau of Labor Statistics to document what similar roles pay in my area. I keep this documentation in my tax files as backup. 3. **Start simple**: You don't need an expensive payroll service right away. I started with a basic one that handles the 941 quarterly filings and W-2s automatically. The peace of mind is worth the monthly cost. 4. **State requirements vary**: Check your state's specific rules - some have additional requirements beyond federal. I almost missed registering for state unemployment insurance in my state. The tax savings definitely outweigh the complexity once you're set up. Just budget for the payroll service cost when calculating your overall S Corp savings. Feel free to ask if you have specific questions about any part of the process!

Has anyone here used the free IRS Volunteer Income Tax Assistance program for help with partnership returns? My local place said they don't do business returns but then another volunteer said they sometimes help with simple partnerships.

Daniel, you've gotten some good advice here already! Just wanted to add a couple of practical tips from when I helped my sister with her dissolved LLC filing last year. Make sure you're consistent with how you report the dissolution date throughout all your forms - use the same date on Form 1065 and all the K-1s. The IRS gets picky about date inconsistencies. Also, since you mentioned you had cloud servers and software subscriptions, double-check that you've accounted for any prepaid expenses that might need to be prorated. If you paid for annual subscriptions but only used them part of the year before dissolving, you might be able to deduct the full amount since the business ceased operations. One last thing - keep really good records of all this. Even though the LLC is dissolved, the IRS can still come back with questions for up to 3 years, and partnership audits can be particularly messy if your documentation isn't solid.