I had a very similar experience last year! The key thing to understand is that the IRS processes S corp elections even if you don't receive confirmation. Since your 1120 was rejected, that's actually strong evidence your S election went through. Here's what I'd recommend: First, try logging into your IRS business online account at irs.gov - sometimes you can see your entity status there without calling. If that doesn't work, you can also request a transcript of your business account online or by mail using Form 4506-T, which will show if your S election is active. For the immediate filing issue, you'll need to prepare and file Form 1120-S instead of the 1120. The good news is that if you can show you never received the CP261 notice (reasonable cause), you may qualify for penalty relief when you file the correct return late. Just make sure to include a letter explaining the situation when you submit your 1120-S. One quick tip - check your spam/junk folder for any IRS emails, and also verify they have your correct mailing address on file. Sometimes these notices get lost due to address issues.

I just went through this exact situation a few months ago! The rejection of your 1120 is actually good news - it means your S election likely did go through. Here's what worked for me: Call the IRS Practitioner Priority Service line at 866-860-4259 instead of the regular business line. The wait times are usually much shorter (I got through in about 20 minutes vs. hours on the main line). When you reach an agent, ask them to check your "Entity Control Date" - this will show when your S election became effective. In my case, they confirmed my S corp status was active even though I never received the CP261. The agent explained that mail delivery issues are common with these notices, and the rejection of a 1120 filing is actually one of their standard ways to alert taxpayers about the status mismatch. You'll need to file Form 1120-S for 2023, but don't panic about late filing penalties. Include Form 2210 requesting reasonable cause relief and explain that you never received confirmation of your S election. I got my penalties completely waived this way. Also, make sure to update your address with the IRS and consider having future notices sent to your accountant if you have one - this prevents missing important correspondence in the future.

bruh the IRS is straight up playing games with our money. we need to start charging them interest fr 😤

I'm in almost the exact same situation! Filed 2/8, got the 60-day letter, congressman got involved in April, and now I'm just waiting on my TAS advocate too. The whole "IRS won't talk to you once TAS is involved" thing is so frustrating - like we're stuck in limbo. At least we know we're not alone in this mess. Hoping both our cases get resolved soon! 🤞

I'm glad to see this thread has been so helpful for understanding the Medicare tax situation! As someone who works in tax preparation, I see this confusion a lot with clients who are maximizing retirement contributions and don't understand why they're still hitting payroll tax thresholds. One additional point that might be useful - if you're planning to continue with MFS filing in future years for your student loan strategy, consider setting up quarterly estimated tax payments specifically for that Additional Medicare Tax. Since it's calculated on your Medicare wages (which include your 401k contributions), your employer's withholding might not cover the full amount, especially if your income fluctuates throughout the year. You can use Form 1040ES to calculate and pay estimated taxes quarterly. This way you won't get hit with a surprise tax bill next April, and you'll avoid any potential underpayment penalties. The Additional Medicare Tax doesn't have the same "safe harbor" rules as regular income tax, so it's worth being proactive about it. Also, keep detailed records of your student loan payment savings vs. additional tax costs each year. The income thresholds and payment calculations can change, so what makes sense financially this year might not be optimal in future years as your income grows or your loan balance decreases.

This has been such an informative thread! I learned a ton just reading through all the responses. I'm in a somewhat similar situation with MFS filing for student loan benefits, though my income is a bit lower at around $115k. One thing I wanted to add that I didn't see mentioned - if you're close to these thresholds, it might be worth looking into whether your employer offers a Roth 401k option alongside the traditional pretax 401k. While Roth contributions won't help you now (since they're made with after-tax dollars), they could be beneficial if you expect to be in a higher tax bracket in retirement. More importantly for your current situation, you could potentially split your contributions between traditional and Roth based on where you expect to land relative to the Medicare tax threshold. For example, if you know you'll be over $125k regardless, you might put enough in traditional 401k to optimize your income tax situation, then put additional savings into Roth to avoid making the Medicare tax situation even worse with a higher salary next year. The flexibility of being able to adjust your pretax vs after-tax contribution mix throughout the year (most employers allow this) could help you fine-tune your strategy as you get a better sense of your actual year-end income. Just another tool in the toolkit for managing these complex MFS + high income situations!

This thread has been super helpful! I'm in a similar situation with my new marketing agency. One thing I'm still confused about though - what exactly counts as a "startup cost" versus a regular business expense? For example, I bought a laptop specifically for the business before I officially launched, but I also bought office supplies after I started getting clients. The laptop was $1,200 and happened before my first client, but the office supplies were ongoing purchases after I started operating. Does the timing matter more than the type of expense? And do equipment purchases like laptops get treated differently since they're typically depreciated anyway? I want to make sure I'm categorizing everything correctly for that $5,000 deduction.

Just wanted to add something that might help clarify the equipment vs. startup cost question that Paloma raised. I dealt with this exact issue when I started my consulting business. The IRS has specific rules about equipment purchases - if an item costs more than a certain threshold (currently $2,500 for most small businesses under the de minimis safe harbor rule), it generally needs to be depreciated rather than expensed immediately, regardless of whether it's a startup cost or regular business expense. So for your $1,200 laptop, you actually have some options: 1. Treat it as a startup cost (part of your $5,000 deduction) if purchased before operations began 2. Use Section 179 to deduct it immediately as equipment (up to certain limits) 3. Depreciate it over several years The good news is that $1,200 is well under the threshold where you'd be forced to depreciate it. You'll want to consider which approach gives you the best tax benefit - sometimes taking the equipment deduction separately from startup costs works out better mathematically. I'd definitely recommend running the numbers both ways or consulting with a tax professional since equipment purchases can be tricky to optimize.

Has anyone used TurboTax Self-Employed for a situation with multiple income sources? Worth the money or nah?

I'm in a very similar boat with multiple income streams - W2 from my day job, freelance writing work, and selling crafts on Etsy. What really helped me get organized was setting up separate business bank accounts for each of my self-employment activities. It makes tracking income and expenses so much cleaner when tax time comes around. One thing I wish someone had told me earlier - start tracking your business mileage NOW if you're not already! Any trips for your marketing contractor work or to buy supplies for your handmade items can be deductible. I use a simple mileage app on my phone and it's saved me hundreds in deductions. Also, don't forget about the home office deduction if you use part of your home exclusively for your graphic design work or crafting. Even if it's just a corner of a room, it can add up to significant savings. The simplified method lets you deduct $5 per square foot up to 300 square feet, which is much easier than calculating actual expenses.