My situation was pretty similar last year excepted I had 2 kids. Got back like 7k total between federal and state. Your probably gonna get more with the extra dependents

With your income and family situation, you're definitely looking at a substantial refund! At $24k income with 4 dependents, you'll likely qualify for the maximum Earned Income Tax Credit (around $6,935 for 3+ qualifying children), plus Child Tax Credit for your kids under 17 ($2,000 each). The adult dependent should get you the Other Dependent Credit ($500). Quick math: you're probably looking at $8k-10k federal refund, maybe more. Plus you'll get most of that state withholding back too. Definitely file as Head of Household and make sure to gather all your documentation for the dependents. You should be able to file soon since the IRS opens for e-filing on January 27th this year!

I messed this up last year and had to file an amended return! TurboTax showed the self-employment tax deduction but I thought it was an error and removed it. Ended up paying more taxes than I needed to. For anyone who's confused like I was: this is legitimate and automatic in tax software. Just leave it alone and let it calculate correctly. My mistake cost me a few hundred dollars plus the hassle of filing an amended return.

Just to add one more perspective as someone who's been self-employed for several years - this deduction is one of the few tax breaks that actually helps level the playing field a bit between employees and self-employed folks. When you're an employee, your employer pays their half of Social Security/Medicare taxes and gets to deduct that as a business expense. Since self-employed people ARE the employer, we get to deduct the "employer portion" (half) of our SE taxes. It might help to think of it this way: you're wearing two hats - employee and employer. The employee half pays 7.65% in payroll taxes, and the employer half pays 7.65% and gets to deduct it. The SE tax deduction lets you deduct the employer portion just like any other business would. The math can definitely look weird in tax software at first, but once you understand the logic behind it, it makes perfect sense!

Don't forget about debt basis too! The basis calculation gets more complicated if you have loans to the S corp. Also remember that the order matters: 1. Income increases basis 2. Non-deductible expenses decrease basis 3. Distributions decrease basis In your example, since income exactly equals your salary + distributions, your ending basis is correctly $0. But as others mentioned, that doesn't make the distributions capital gains - they're still return of capital because you had sufficient basis when taking them.

The K-1 (Form 1120S Schedule K-1) is where most of this gets reported. Box 16 shows distributions to shareholders, and your share of income/losses flows through via Box 1 (ordinary income). However, the K-1 doesn't directly show your basis calculation - that's something you need to track separately. You'll report the pass-through income on your personal return (Form 1040), but the distributions themselves aren't directly reported as taxable income since they're return of capital up to your basis. The tricky part is that YOU are responsible for tracking your basis year over year - the IRS doesn't do this for you. I'd recommend keeping a simple spreadsheet tracking: starting basis + income + other increases - distributions - losses = ending basis. This becomes crucial if you ever have distributions that exceed basis, because then you'd need to report the excess as capital gains on Schedule D.

Anyone know if this applies to ACTC (Additional Child Tax Credit) too? My tax software is giving me both EIC and ACTC even though my divorce decree says my ex claims our son this year.

This is exactly the kind of confusion that trips up so many divorced parents! Your tax software is actually correct - you CAN claim the Earned Income Credit even though your ex will be claiming the Child Tax Credit for your daughter. The key thing to understand is that the IRS treats these as completely different types of benefits. The EIC is what's called a "custodial benefit" - it goes to the parent the child actually lived with for more than half the year, regardless of any custody agreements about who claims the child as a dependent. Since your daughter lived with you for more than 6 months, you qualify for EIC based on your income. Your ex can still claim the Child Tax Credit because your custody agreement gives him the right to claim her as a dependent, but that doesn't affect your EIC eligibility at all. Make sure you keep good records showing your daughter lived with you for more than half the year (school records, medical records, etc.) in case the IRS ever questions it. But you're absolutely entitled to that EIC - don't leave money on the table because of bad advice!

Would it be better to adjust your W-4 with your employer so they don't withhold as much in the first place? Seems like a waste to let the government hold onto your money interest-free all year.

You're definitely in luck! With income under the standard deduction ($12,950 for single filers in 2024), you shouldn't owe any federal income tax. However, keep in mind that the $1,260 withheld likely includes both federal income tax AND FICA taxes (Social Security and Medicare at 7.65%). You'll get back the federal income tax portion but not the FICA. Quick math: on $11,800 income, FICA would be about $902, so you might get back around $358 in federal income tax refund. But definitely file to claim it! Also consider if you qualify for any refundable credits like the Earned Income Credit - these could potentially give you back MORE than what was withheld. And next year, you might want to adjust your W-4 to reduce withholding since you're under the taxable threshold.