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 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.

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 has been such an educational thread! As someone who's been wrestling with the same S-Corp cell phone deduction question, I'm really grateful for all the detailed advice shared here. What's becoming clear to me is that the "mixed approach" (100% purchase, 80% monthly bills) that some accountants suggest is actually problematic because it lacks consistency. The IRS wants to see logical, defensible positions - not creative interpretations that might maximize deductions but create audit risks. I'm convinced now that the tracking approach is the way to go. @Javier Hernandez and @Kara Yoshida - your real-world examples of 12-week and 3-month tracking periods really help show this is manageable, not some overwhelming administrative burden. Getting actual data like 72% or 78% business use feels much more defensible than pulling a round number out of thin air. The accountable plan approach for S-Corps also makes total sense from a compliance standpoint. Having the company reimburse you for the documented business portion creates cleaner separation than trying to navigate the personal use rules for company-owned assets. One thing I'm taking away is that it's better to be conservative and confident in your position than aggressive and worried about audit exposure. A 75% deduction you can fully document and defend is worth more than a 100% deduction that keeps you up at night wondering if you've pushed too far. Thanks to everyone who shared their professional insights and personal experiences - this discussion has been more valuable than anything I found in official IRS publications!

Reading through this discussion has been incredibly enlightening! As someone who just started an S-Corp this year, I was completely unaware of the complexities around cell phone deductions and the importance of consistent treatment across different expense types. The consensus here seems clear: document everything, track actual usage over several months, and apply the same business percentage to both the device purchase and monthly service costs. The "mixed approach" that some accountants suggest really does seem like it creates unnecessary audit risk for minimal benefit. I'm particularly grateful for the practical examples shared by @Javier Hernandez, @Kara Yoshida, and others who went through the actual tracking process. Seeing real percentages like 72% and 78% based on documented usage makes this feel much more manageable than trying to justify arbitrary round numbers. One question for those who've implemented the accountable plan approach - when setting this up with your S-Corp, did you need to establish formal written policies, or is it sufficient to have consistent documentation of the reimbursement process and supporting records? I'm definitely going to start tracking my usage immediately rather than trying to estimate retroactively. Better to have solid data from the beginning than scramble to justify percentages later if questions arise. Thanks to everyone for sharing such detailed, practical advice!

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.