One strategy that hasn't been discussed yet is considering a charitable remainder trust (CRT) if you have any philanthropic goals. This could be particularly effective given your large capital gain situation. With a CRT, your S-corp could donate the appreciated real estate to the trust, receive an immediate tax deduction, and then the trust sells the property without paying capital gains tax. You'd receive income payments from the trust for a specified period (or life), and the remainder goes to charity. This strategy works especially well when you're facing a large one-time gain like your projected $175K. The immediate charitable deduction could offset a significant portion of other income, and you'd convert the lump-sum gain into a stream of income over time. The downside is that you don't retain ownership of the property, and there are minimum payout requirements and administrative costs. But given the size of your gain and the limited time for other strategies, it might be worth exploring alongside the 1031 exchange options. You'd need to work with an attorney who specializes in charitable planning, but the potential tax savings could be substantial. Even if you're not particularly charitably inclined now, you might find it attractive compared to writing a massive check to the IRS. Just another tool to consider as you're evaluating all your options. The key is getting professional advice quickly since most of these strategies require advance planning and can't be implemented at the last minute.

I went through almost the exact same situation two years ago - S-corp owning commercial real estate that we needed to sell. The tax hit was brutal, but I learned some valuable lessons that might help you. First, definitely explore the 1031 exchange route while you still can. Even though it's S-corp owned property, it absolutely can work. The key is getting a qualified intermediary involved NOW, before you sign anything with buyers. I made the mistake of waiting too long and missed this opportunity entirely. Second, regarding your negative AAA balance - while it won't directly offset the gain from the property sale, it will affect how you can take distributions afterward. Make sure your new tax professional understands how this works because it can create some unexpected complications if not handled properly. One thing I wish I had done was a cost segregation study earlier in the ownership period. We did one right before selling and it helped somewhat, but if we'd done it years ago and been taking accelerated depreciation all along, we would have had more flexibility with the tax planning. The depreciation recapture is going to be painful - mine ended up being about 30% of the total gain when you factor in federal and state taxes. But don't let that discourage you from exploring all your options. Even saving 20-30% on the total tax bill makes a huge difference. My biggest recommendation: budget for good professional help immediately. I spent about $8K on a specialized tax attorney and qualified intermediary consultations, but it saved me over $40K in taxes through proper structuring. Worth every penny. Time is your enemy here, so don't delay like I did. Start making calls this week.

One thing nobody has mentioned - make sure you're claiming the Earned Income Tax Credit too! With $8,500 income and two children, you should qualify for a substantial EITC which is fully refundable. This might help offset some of the disappointment from the reduced Child Tax Credit.

@Dylan Cooper makes an excellent point about the Earned Income Tax Credit! With your income of $8,500 and two qualifying children, you should definitely be eligible for EITC, which could be worth around $5,000-6,000 depending on your exact situation. This is completely separate from the Child Tax Credit and is fully refundable. Also wanted to mention - if you're planning to return to full-time work soon, you might want to consider the timing of when you do. If you can increase your earned income for this tax year (maybe through some part-time work before December 31st), it could boost both your Child Tax Credit and EITC for when you file next year. I know it's frustrating that the system seems to penalize lower incomes for the Child Tax Credit, but the EITC is specifically designed to help working families with lower incomes, so make sure you're not missing out on that significant credit!

Hey quick question - if my wife was unemployed most of year but did some freelance work making like $600 total, do we still need to report that? It was just cash for helping a friend with their website. No 1099 or anything.

I went through this exact situation two years ago when my husband was laid off in September. Here's what I learned that might help ease your stress: Filing jointly is definitely still the way to go - you'll get the full married filing jointly standard deduction and it's much simpler than filing separately. Your husband doesn't need any special paperwork proving he was unemployed. Just file your W-2 as normal and leave his income section blank. One thing to watch out for - if your husband received ANY unemployment benefits, even for a short period, he should have received a 1099-G form that you'll need to include. Those benefits are taxable income. Also, if he's been job searching, keep track of any job search expenses (resume services, travel for interviews, etc.) as some of those might be deductible. The reduced household income might actually work in your favor for certain credits like the Earned Income Credit if you have kids, or other income-based credits you might not have qualified for before when both of you were working. Don't stress too much about filing early - take your time to make sure you have everything right. The refund will come either way!

22 Quick tip from someone who's been there - if you're filing late for your partnership, include a letter explaining that you're first-time business owners who were unaware of the filing requirements. The IRS often waives penalties for first-time filers if you have a reasonable explanation!

Just to add to the excellent advice already given - don't forget that even though you haven't started operations, you may still need to obtain an EIN (Employer Identification Number) if you haven't already. The IRS requires partnerships to have an EIN for filing Form 1065, regardless of activity level. Also, make sure to keep detailed records of that laptop purchase including the receipt, date of purchase, and business purpose documentation. Even though it's a simple expense, proper documentation will be crucial if you ever get audited. The IRS likes to see clear business purpose for all deductions, especially in the early years when partnerships haven't established revenue patterns. One more thing - consider setting up a separate business bank account if you haven't already. It makes tracking expenses much easier and shows the IRS you're treating this as a legitimate business entity rather than just a personal venture.

20 Quick question guys - I'm using TurboTax Business for our partnership filing with no income. Does anyone know if I still have to pay the full price even though we have basically nothing to report?

Just went through this exact situation last month! We formed our LLC partnership in September but didn't start generating revenue until January. You absolutely need to file Form 1065 even with zero income - the IRS considers you "in business" once you've made that first business purchase (your printer). For online filing, I'd recommend checking out FreeTaxUSA Business - it's much cheaper than TurboTax but still handles e-filing perfectly. Since you only have minimal activity, you'll probably qualify for their basic tier. The form will show your printer as a business asset and any setup costs as startup expenses. Pro tip: Make sure to keep detailed records of that $350 printer purchase and any other business expenses, even small ones. You'll need the dates and amounts for your first filing, and it establishes good bookkeeping habits for when your craft business takes off! The March 15th deadline is coming up fast, so don't wait too long. If you're cutting it close, you can always file for an automatic extension using Form 7004.