Has anyone found a good way to adjust withholding to make it more accurate? I'm tired of giving the govt an interest-free loan every year with my massive refund, but I'm also afraid of owing a bunch.

This is such a great question! I went through the exact same confusion when I started trying to understand my paychecks better. One thing that really helped me was realizing that withholding tables also have to account for the timing of when you get paid. If you're paid weekly, the system has to estimate your annual income based on just one week's pay, then figure out how much to withhold from that single check to cover your whole year's taxes. It's kind of like if someone asked you to guess how much you'll spend on groceries for the entire year based on just one shopping trip - you'd have to make a lot of assumptions! The withholding system has to make similar assumptions about your total income, deductions, and tax situation. The good news is that it all gets sorted out when you file your return. The withholding is just meant to get you in the ballpark, not be perfect. That's why most people either get a refund or owe a little bit - it's really hard for the system to get it exactly right with limited information.

I've handled this exact situation multiple times and here's what I've found works best: The cleanest approach is actually a hybrid of what's been discussed. File the Schedule C but create a separate line item for "Owner wages (non-deductible)" to show the wages paid but not claim them as a business expense. This maintains transparency with the IRS about what happened. The key is documentation - attach a statement to the return explaining that wages were paid in error before realizing no S-Corp election was filed, and that going forward the business will operate correctly as a sole proprietorship with owner draws instead of wages. Don't try to amend the 941s - it creates more problems than it solves. The employer portion of payroll taxes already paid becomes a sunk cost, but it's better than the audit risk of trying to unwind everything. For next year, if the business profits justify it (generally $60K+), consider making a proper S-Corp election. Otherwise, stick with Schedule C and take owner draws. The administrative headache of S-Corp isn't worth it for smaller businesses. Most importantly, have the client sign an engagement letter acknowledging the situation so you're protected if questions arise later.

This is a great thread with lots of practical advice! I've been lurking here as a small business owner who made this exact mistake last year. After reading through all the responses, I ended up going with the approach Sofia Martinez suggested - filing Schedule C with the "Owner wages (non-deductible)" line item and attaching an explanatory statement. Just wanted to share that it worked smoothly - no questions from the IRS, no audit triggers, and I was able to move forward cleanly this year with proper owner draws instead of wages. The key really was the clear documentation showing I understood the mistake and was correcting it going forward. For anyone else dealing with this, don't panic - it's more common than you think and the IRS seems to understand that small business owners sometimes get confused about entity structures, especially when working with accountants who don't properly advise on elections. The transparency approach definitely beats trying to hide the issue or over-complicate the fix. Thanks to everyone who contributed advice here - this community is incredibly helpful for navigating these tricky tax situations!

This thread has been incredibly informative! As someone who works in corporate tax compliance, I want to add that the IRS is actually pretty clear on this issue in Publication 15-B (Employer's Tax Guide to Fringe Benefits). When a vehicle is provided for business use only, it should qualify as a "working condition fringe benefit" under Section 132(d) of the tax code. This means it's not taxable to the employee AND the employer shouldn't be charging the employee for it, since it's considered a business expense necessary for the employee to perform their job. The red flag in your situation is that your company is treating this as both a business necessity (work-only restriction) and a personal benefit (charging you a fee). That's contradictory from a tax perspective. I'd recommend asking your HR department for a written explanation of how they're justifying both the restriction AND the fee under IRS guidelines. Most companies doing this are simply confused about the tax treatment and will correct it once they understand the issue. If they can't provide a clear justification that aligns with IRS rules, you may want to escalate this or seek outside guidance.

As someone who recently went through a very similar situation, I want to echo what Diego mentioned about Publication 15-B. That document was a game-changer for me when I was dealing with my company's confusing vehicle policy. What really helped me was printing out the relevant sections of Publication 15-B and highlighting the parts about working condition fringe benefits. When I brought this to my HR meeting, it shifted the conversation from "this is just our policy" to "let's make sure our policy complies with IRS requirements." One thing I'd add to the great advice already given here - document everything. Keep copies of your employment contract, any written vehicle policies, pay stubs showing the deductions, and any email communications about the vehicle arrangement. If your company does need to make corrections (like several people have mentioned happened at their companies), having this documentation will help ensure any refunds or policy changes are applied correctly to your situation. Also, don't be afraid to ask questions. In my experience, most HR departments genuinely want to do the right thing - they just sometimes inherit policies that weren't set up correctly from a tax perspective. Approaching it as "can you help me understand how this works for tax purposes" rather than "this seems wrong" tends to get better results.

Great decision, Sean! This thread has been incredibly educational for everyone involved. As someone who works in financial compliance, I see these types of schemes regularly, and they always follow the same pattern - complex structures that exist primarily for tax avoidance rather than legitimate business purposes. What's particularly valuable about this discussion is how it demonstrates the importance of community knowledge sharing. The collective experiences shared here - from those who nearly fell for similar schemes to those who got audited - create a comprehensive picture that's much more powerful than any single professional opinion. For future reference, the IRS publishes an annual "Dirty Dozen" list of tax scams that often includes these types of abusive tax shelters. They also maintain a list of "reportable transactions" that must be disclosed on tax returns, and many of these software license/LLC arrangements fall into that category. The fact that you trusted your instincts and sought out community input before making a decision shows exactly the kind of due diligence that protects people from financial harm. Your experience will undoubtedly help others who find this thread after being approached by similar companies. Thanks for sharing your story and for the follow-up on your decision. It's a perfect example of how asking the right questions and getting multiple perspectives can save you from very expensive mistakes.

As a tax professional who's been dealing with these schemes for over a decade, I want to applaud everyone who shared their experiences here - this is exactly the kind of community knowledge sharing that protects people from financial predators. Sean, your decision to walk away was absolutely the right call. What strikes me about the My Health CCM pitch is how it hits every single checkbox on the IRS's list of abusive tax shelter characteristics: artificial complexity, disproportionate tax benefits, entity creation solely for tax purposes, and most tellingly, the insistence on using their "approved" professionals. I've represented clients in audits involving virtually identical structures, and the outcomes are consistently bad. The IRS has specific teams dedicated to unwinding these arrangements, and they're very good at it. They'll typically challenge both the inflated valuation of the software licenses AND the business purpose of the entire structure. For anyone else reading this who might be considering similar arrangements, here's my professional advice: if a tax strategy requires you to create new entities, involves transactions primarily with the company selling you the strategy, or promises tax benefits that seem disproportionate to your economic risk, get multiple independent opinions from tax professionals who have ZERO financial relationship with the promoter. The legitimate tax planning world has plenty of genuine opportunities that don't require elaborate schemes or artificial time pressure. Trust your instincts, do your due diligence, and remember that the best tax strategy is one that makes business sense first and tax sense second. Thanks again to everyone who contributed to this invaluable discussion!

22 One thing nobody's mentioned is using a dedicated credit card for your cash withdrawals. I have a business credit card that I ONLY use for ATM withdrawals for inventory purchases. Then in my records, I note which items were purchased with which withdrawal. Creates a clear paper trail from credit card statement → cash withdrawal → inventory purchase → sale. My accountant loves this system!

As someone who's dealt with similar documentation challenges, I'd strongly recommend also keeping a mileage log specifically for your business trips. The IRS allows you to deduct business mileage at the standard rate, and those pickup trips to Facebook Marketplace sellers definitely qualify. I use a simple app that tracks my location and lets me categorize trips as business or personal. For each pickup, I log the starting point, destination, and business purpose ("Inventory purchase - iPhone 12"). This adds up to significant deductions over time and creates another layer of legitimate business expense documentation. Also consider photographing the items with a timestamp when you first acquire them, then again when you list them for sale. This visual documentation helps establish the business nature of your purchases and can be valuable supporting evidence if questioned.