I went through something very similar when I switched jobs mid-year and my new employer somehow set up my withholding incorrectly. The good news is that with 2 kids under 10, you have some solid tax credits working in your favor. The Child Tax Credit alone could give you up to $4,000 ($2,000 per child), and depending on your income level, a significant portion of that can be refundable even if you paid zero in withholding. The Earned Income Tax Credit could also apply if your income falls within certain ranges - with 2 qualifying children, this can be worth thousands more. Your health issues might also qualify you to file as Head of Household, which has better tax brackets and a higher standard deduction. I'd definitely recommend running your numbers through some tax software to get a realistic picture, but don't panic - families with dependents often come out better than they expect, even with withholding issues.

The EITC income limits for 2023 (filing in 2024) with 2 qualifying children are pretty generous - you can earn up to about $50,594 if filing single or $56,844 if married filing jointly and still get some credit. The maximum EITC with 2 kids is $6,164, which phases out as your income increases. Combined with the Child Tax Credit, you could potentially see a substantial refund even with zero withholding. Just make sure your kids meet the qualifying child requirements (age, relationship, residency tests) and that they have valid Social Security Numbers. Also, definitely fix your W-4 going forward to avoid potential underpayment penalties next year. Your situation with health issues and being the primary caregiver for 2 young kids sounds like it would qualify you for Head of Household status, which would give you even better tax treatment.

So sick of our tax system. In many civilized countries, the government just sends you a pre-filled form with all your info already on it, and you just approve it. But here we have to stress about every little thing and wonder if we'll get flagged for audit. 😤

Congrats on your little one! You're right to think ahead about this. The IRS doesn't require you to submit documentation upfront when claiming a dependent, but they do cross-check the information you provide (name, SSN, DOB) with Social Security Administration records. Keep these documents organized and easily accessible in case you ever need them: - Birth certificate - Hospital discharge records - Any medical records showing you as the parent - Records showing the child lived with you (like pediatrician visits to your address) The key things that could trigger a review are: incorrect SSN, someone else also claiming the same child, or if it's flagged for a random verification check. Since this is your first time claiming her and she's only 10 months old, just make sure all the basic info matches exactly what's on her Social Security card. Most people never get asked for verification, but if you do, having everything ready will make the process much smoother. Good luck!

I'm going through the same struggle with understanding my self-employment taxes! Reading through all these explanations has been incredibly helpful - I had no idea about the flow from Schedule C to Schedule SE to Form 1040. One thing that's been confusing me is the timing of everything. If I'm making quarterly estimated payments based on last year's tax liability, but my income is significantly higher this year, how do I avoid getting hit with a big tax bill at the end of the year? Also, for those who mentioned the QBI deduction - is this something that gets calculated automatically by tax software, or do you have to specifically claim it? I've been doing my own taxes with TurboTax but I'm not sure if I've been missing out on this deduction. The idea of actually understanding my tax forms instead of just blindly trusting my software sounds really appealing. I feel like I've been flying blind for too long!

This thread has been so helpful! I'm also self-employed and have been struggling with the same issues. Reading through everyone's explanations, I finally understand the flow: Schedule C (business profit) → Schedule SE (self-employment tax calculation) → Schedule 2 → Form 1040 Line 24 (total tax owed). I think the key insight for me was realizing that when people say they "owed zero taxes" it doesn't necessarily mean they had no tax liability - it often means their estimated payments, deductions, and credits covered their total tax bill. For anyone still confused like I was, here's my simplified takeaway: - Schedule C shows your business profit/loss after expenses - Schedule SE calculates your 15.3% self-employment tax on that profit - Form 1040 combines everything to show your total tax liability - Line 24 = what you owe total, Line 33 = what you already paid, Line 37 = final amount owed or refunded The QBI deduction mentioned earlier can be huge too - up to 20% off your business income for most self-employed folks. Definitely worth double-checking that you're getting this on your returns! Thanks to everyone who shared their knowledge here. This community is amazing for helping each other navigate these confusing tax situations.

I think everyone's missing something important here - the interest on shareholder loans can actually be beneficial in the right situation. If your business is profitable and you're in a high personal tax bracket, having the business pay you interest (which is deductible for the business) can be an effective way to extract money from the company without triggering employment taxes. The business gets a deduction for the interest payments, reducing its taxable income. You'll pay ordinary income tax on the interest received, but no self-employment or payroll taxes. Just make sure the interest rate is reasonable (at least the AFR) and that everything is documented properly.

Great question about the tax implications! You're right that this decision can have significant long-term consequences. One additional consideration I haven't seen mentioned is the timing flexibility. With shareholder loans, you have much more control over when you take the money back out. You can repay yourself when it's most tax-advantageous - perhaps in a year when your personal income is lower or when the business has better cash flow. With equity contributions, you're essentially locked into taking distributions when the company declares them (if it's profitable enough to do so), or you'd need to find a buyer for your shares to get your money back. Also, if your business ever faces financial difficulties, shareholder loans typically have priority over equity in terms of repayment. So from a risk perspective, the loan structure offers some protection. That said, make sure you're not creating a situation where the loan balance becomes so large that it affects your ability to take advantage of other tax benefits. For S-Corps especially, your stock basis and debt basis calculations can get complex when you have large outstanding shareholder loans. I'd recommend running the numbers both ways with your tax professional to see which approach minimizes your overall tax burden based on your specific situation and timeline for getting the money back.

Can I ask what state you're in? Different states have additional child tax credits on top of the federal ones. For example, here in NY we have an Empire State Child Credit that's worth up to 33% of the federal credit for kids over 4. Doesn't help with infants but something to keep in mind for future years.

Just wanted to add another perspective on timing - if you're planning to have more kids in the next few years, keep in mind that the Child Tax Credit applies per child, so it scales up nicely. But the Dependent Care FSA stays capped at $5,000 total regardless of how many kids you have. Also, don't forget about the Child and Dependent Care Credit (Form 2441) that someone mentioned earlier - this is actually different from the Child Tax Credit and can be claimed on top of your FSA contributions, though you can't double-dip on the same expenses. At your income level, this credit phases out pretty quickly, but it's worth having your tax preparer calculate it just in case. One more tip: if either of you has a flexible work schedule, consider timing your FSA contributions to align with when you'll actually need the childcare. Some people front-load their contributions early in the year when daycare costs are highest, then adjust later in the year if needed during open enrollment.