Does anyone have experience using QuickBooks for tracking S-Corp distributions vs retained earnings? Their reporting seems confusing for this specific situation.

Just wanted to add another perspective on the retained earnings documentation piece. I've been running my S-Corp for 5 years and learned this the hard way - make sure you're documenting the business purpose for retaining earnings in your corporate minutes or resolutions. The IRS likes to see that retained earnings serve a legitimate business purpose (like saving for equipment purchases, building emergency reserves, or funding expansion plans). I keep quarterly board resolutions (even though I'm the only member) explaining why we're retaining earnings and what they'll be used for. My CPA said this kind of documentation can be really helpful if you're ever questioned about why profits weren't distributed. Also, don't forget that even though you'll pay income tax on the profits whether you take them or not, keeping money in the business does give you more flexibility for future tax planning strategies. You can time distributions in years when your personal tax situation might be more favorable.

don't forget the business structure matters!! if ur a single-member LLC or sole prop, these deductions go on ur Schedule C. but if ur an S-corp, the Section 179 deduction flows through to ur personal return differently! made this mistake last yr and had to amend everything!!

This is exactly the kind of confusion I had when I started my small business! The key thing that helped me understand is that these are completely separate buckets of deductions that serve different purposes. For your specific purchases: - Laptop ($1,800): Section 179 eligible - Office furniture ($3,200): Section 179 eligible - Software ($1,200): Section 179 eligible (if it's off-the-shelf software) So you could potentially deduct all $6,200 of those equipment purchases under Section 179 in your first year. Then separately, you can also deduct up to $5,000 of your true startup costs (things like business registration fees, initial market research, pre-opening advertising costs, etc.). The beauty is that Section 179 has that massive $1.2 million limit for 2025, so your $6,200 in equipment is nowhere near that cap. You're not limited to $5,000 like with startup costs. Just make sure to keep good records of what constitutes actual startup expenses versus equipment purchases. Your accountant will thank you come tax time!

Don't forget about the "recapture" when you eventually sell! I learned this lesson the hard way. When you sell a rental property, you'll have to "recapture" all that depreciation you've been taking over the years and pay taxes on it (at a rate up to 25%). Even if you don't actually claim the depreciation on your tax returns, the IRS will treat it as if you did when you sell, so you might as well take the deduction. Just be prepared for that tax bill down the road when you sell. Something to consider in your long-term planning.

Great discussion here! As someone who went through this conversion process a few years ago, I can confirm what others have said about using the lower of adjusted basis or FMV at conversion time. One thing I'd add that hasn't been mentioned yet - make sure you're tracking your depreciation carefully each year, even if you can't currently deduct the losses due to passive activity limitations. The IRS requires you to reduce your basis by the depreciation you're "allowed or allowable," so even if the losses are suspended, you still need to calculate and track the annual depreciation. I use a simple spreadsheet to track my original basis, improvements, annual depreciation, and accumulated depreciation. This becomes crucial when you eventually sell the property for calculating gain/loss and depreciation recapture. It's much easier to maintain good records from the start than trying to reconstruct everything years later! Also, don't forget about the possibility of qualifying for the $25,000 rental loss allowance if your income drops below the phase-out thresholds in future years due to job changes, retirement, etc.

I made little cartoon drawings for my niece when she got her first job! 😊 I'm no artist but stick figures work great. I showed: 1) Her paycheck as a pie with slices being taken out labeled "federal," "state," "Social Security," and "Medicare" 2) Her W-4 form as a "slice controller" that adjusts how much is taken out 3) Tax filing as a "final calculation" where she either gets slices back or owes more She totally got it! Visual learners sometimes need to literally see the money moving around. You could try drawing simple diagrams for your brother.

I love all these creative analogies! As someone who works in tax prep during busy season, I see so many people who are terrified of taxes because they think it's this impossibly complex thing. One approach that works really well is the "budgeting backwards" method. I tell beginners to think of taxes like this: imagine you're planning a road trip and need to budget for gas. Throughout the year, your employer estimates how much "gas money" you'll need and sets aside that amount from each paycheck (withholding). At the end of the year, you calculate your actual "gas costs" (tax liability). If they saved too much, you get the extra back (refund). If not enough, you pay the difference. For your brother specifically, I'd recommend he start by just understanding his first pay stub. Have him look at each deduction line by line - federal income tax, state tax, FICA taxes. Once he sees how much is already being taken out, taxes become way less scary because he realizes most of the work is already being done automatically. The key is starting small and building confidence. Don't try to explain everything at once!

This is such a stressful situation, and unfortunately your cousin got some really bad advice from whoever she spoke with at Social Security or the IRS. Large lump sum disability back payments can definitely trigger tax liability even when regular monthly payments aren't taxable. The good news is there are several options available. First, she should absolutely file the required tax return even if she can't pay - the penalties for not filing are much worse than for filing and not paying. Then she can pursue payment options like an installment agreement or potentially an Offer in Compromise if she truly can't afford the full amount. Most importantly, she might be able to use the "lump sum election" to allocate the back payments to the years they were originally intended for, which could significantly reduce the tax burden by spreading it across multiple years instead of having it all count as income in one year. I'd strongly recommend she contact the Taxpayer Advocate Service (they're free and specialize in hardship cases) or get help from a tax professional who understands disability payments. Don't let her ignore this - the IRS is actually pretty reasonable about working with people on disability who genuinely can't pay, but she needs to be proactive about communicating her situation to them.

I'm really sorry to hear about your cousin's situation - this kind of confusion about disability back payments and taxes is unfortunately very common, and it sounds like she got some incorrect information early on. The key thing to understand is that while regular monthly SSDI payments often aren't taxable for people with lower incomes, large lump sum back payments can push someone over the income thresholds that trigger tax liability, even temporarily. This is what likely happened here. Your cousin has several important options she should pursue immediately: 1. **File the return even if she can't pay** - The penalties for not filing are much steeper than for filing without payment. She needs to get compliant first. 2. **Look into the lump sum election** - This allows her to allocate the back payments to the years they were originally meant for instead of counting it all as income in one year. This could significantly reduce her tax burden. 3. **Request a payment plan** - The IRS offers installment agreements, and for people on fixed disability income, these can be very manageable (sometimes as low as $25-50/month). 4. **Consider Currently Not Collectible status** - If she truly cannot pay without compromising basic living expenses, the IRS may temporarily suspend collection efforts. I'd strongly recommend she contact the Taxpayer Advocate Service (taxpayeradvocate.irs.gov) - they're a free service within the IRS that specifically helps people in hardship situations like this. They understand disability cases and can often work out much better solutions than trying to navigate this alone. The most important thing is not to ignore this. The IRS is actually quite reasonable with people on disability who proactively communicate their situation, but ignoring it will only make things worse.