One thing to watch for on your 1099-B is Box 1g "Adjustments". This is where wash sales and other adjustments appear. If you see numbers here, make sure you understand why - especially if there are large amounts. I got audited two years ago because I didn't properly account for wash sale adjustments. The IRS computers automatically flag returns where the numbers from your 1099-B don't match what you report, even if the difference is just in how you calculated the adjustments.

As a tax professional, I want to emphasize a few key points that haven't been fully covered yet: First, regarding wash sales - the disallowed loss doesn't disappear forever. It gets added to the cost basis of your replacement shares, so you'll eventually get that deduction when you sell those shares (assuming no further wash sales). Second, pay close attention to Form 1099-B Box 2 (whether proceeds are from collectibles). If you traded any precious metals ETFs, certain coins, or art-related investments, these may be taxed as collectibles at a higher rate (28% max) rather than normal capital gains rates. Third, if you have any foreign stock transactions, there may be additional reporting requirements on Form 8938 or FBAR depending on the amounts involved. Finally, keep detailed records beyond just the 1099-B. Save your trade confirmations, corporate action notices (stock splits, spinoffs, etc.), and any correspondence with your broker about cost basis corrections. The IRS can audit up to 3 years after filing (or 6 years for substantial understatements), and having complete documentation will save you significant headaches if questions arise. The tools mentioned here like taxr.ai can be helpful for complex situations, but make sure you understand the underlying tax principles so you can spot any errors in automated calculations.

Another option to consider - instead of remodeling your current kitchen, what about adding a separate small kitchenette in another part of your home specifically for the business? My sister did this in her basement for her cake business. The benefit is that you can deduct 100% of that kitchenette since it's exclusively for business, rather than trying to calculate percentages for a shared space. It might also be cheaper than a full kitchen remodel, depending on your situation. She was able to deduct the entire cost of the installation over time (had to depreciate it), plus all the appliances and equipment. Plus, she keeps her family kitchen separate from her business which makes health inspectors happy!

Great question about kitchen remodeling deductions! As someone who's helped many home-based food entrepreneurs navigate this, here are the key points to consider: **Yes, you can deduct portions of your kitchen remodel**, but documentation is crucial. Since you use the kitchen for both personal and business purposes, you'll need to establish a reasonable business-use percentage. I recommend keeping a detailed log for at least 3-4 months showing when the kitchen is used for catering prep versus family meals. **For appliances**: If an appliance is used more than 50% for business, you can deduct that percentage of the cost. A commercial-grade refrigerator used 80% for catering could have 80% of its cost deducted. **For structural improvements** (countertops, cabinets, flooring): These typically need to be depreciated over time rather than deducted immediately, but you still claim the business-use percentage of that annual depreciation. **Pro tip**: Consider whether any improvements are required by health department regulations for your catering permits. These can often be justified as 100% business expenses since they're legally required for your food service business. The fact that you're scaling up to serve 300+ people shows this is clearly a legitimate business operation, not a hobby. Just make sure you have all proper permits and keep meticulous records. A tax professional familiar with food service businesses would be worth the consultation fee to maximize your deductions while staying audit-safe.

Don't forget one important aspect that people overlook: bank accounts and EIN issues when transitioning to S corp status. When you elect S corp taxation for your LLC, your bank accounts and EIN remain the same - you're still the same legal entity. This is actually another reason why the LLC+S corp route is easier than forming a C corp and then electing S corp status. With the latter approach, you'd need new bank accounts, a new EIN, etc. With the LLC approach, you just file the election and modify your operating agreement. For my single-member LLC with S corp election, I just downloaded a template operating agreement specifically for this situation (cost about $50), and it had all the necessary provisions already built in. Way cheaper than hiring an attorney to draft something custom.

This is such a valuable discussion! I went through this exact process last year and want to add a few practical tips that might help others avoid the confusion I experienced. First, you're absolutely right that the process is "easy" from a filing perspective, but there are definitely some nuances with the operating agreement that aren't well explained in most online guides. The key insight is that you're still legally an LLC - you just need your operating agreement to be compatible with S corp tax rules. One thing I wish someone had told me earlier: make sure your operating agreement explicitly addresses what happens if you lose S corp status (due to violating eligibility requirements). Most templates include a provision that automatically reverts the LLC to standard tax treatment if the S election is terminated, which protects your business continuity. Also, regarding the "reasonable salary" requirement that others mentioned - while you don't need to specify dollar amounts in your operating agreement, I found it helpful to include language requiring annual review of compensation to ensure it remains reasonable. This creates a paper trail showing you're actively managing compliance. The meeting/documentation requirements are much simpler than corporate formalities, but don't skip them entirely. Even as a single-member LLC, documenting major decisions with written resolutions helps maintain the corporate veil and shows the IRS you're treating the election seriously.

Just went through this exact situation. One thing nobody mentioned yet - you might want to contact the annuity company and ask if they can process a "direct transfer" to another annuity instead of taking distributions. Some companies allow this for non-spouse beneficiaries, and it can preserve the tax-deferred status while still meeting the 5-year requirement. I transferred mine to a new annuity that I control, which gives me more investment options than what my grandfather had selected. Still have to take it all out within 5 years, but this way I have more control over when and how.

I'm sorry for your loss, Jay. Dealing with financial decisions while grieving is never easy. Based on what you've shared, I'd strongly recommend the stretch payment approach over the lump sum for several reasons: 1. **Tax bracket management**: Adding $77K to your $65K salary would push you well into higher tax brackets for that year, likely costing you significantly more than spreading it over 5 years. 2. **Time value**: Since you don't need the money immediately and already have stable income plus retirement savings, the stretch gives you time to plan and potentially optimize your overall tax situation each year. 3. **Flexibility**: You can always accelerate distributions in later years if your circumstances change, but you can't undo taking a lump sum. Given that you work for the county, you might also want to check if your employer offers any financial planning services through your benefits package. Many government employers provide access to retirement planning specialists who understand public sector benefits. Also consider maximizing your 457 contributions in the years you're taking distributions to help offset some of the tax impact. The combination of stretch payments plus increased pre-tax retirement contributions could significantly reduce your overall tax burden. Take your time with this decision - you have options and don't need to rush.

Random question - what tax software are you using for the partnership return? I've found some handle liquidating distributions with negative capital accounts better than others.

I dealt with a very similar situation last year and want to emphasize something that might not be immediately obvious - make sure you're also considering the partnership agreement's liquidation provisions. In our case, we had language that specifically addressed how negative capital accounts should be handled upon liquidation, which affected whether the departing partner had a restoration obligation. Also, don't forget to check if your partnership has made a Section 754 election or if you should consider making one now. When a partner with a negative capital account liquidates, there can be significant inside basis adjustments that affect the remaining partners. In our situation, failing to make the 754 election would have resulted in a built-in loss that the remaining partners couldn't benefit from. One more thing - document everything thoroughly. The IRS tends to scrutinize these liquidating distributions, especially when there are negative capital accounts involved. We kept detailed records of the partner's capital account history, the reasons for the liquidation, and all the calculations. This saved us during an audit two years later.