I'm dealing with this exact same situation right now as a new S-Corp owner! Reading through all these responses has been super helpful, especially the real audit experience from Daniel. It sounds like the consensus is pretty clear - if you're actively working in the business, you need to pay yourself a reasonable salary regardless of distributions. What I'm taking away is that I need to start documenting everything now: my hours worked, what comparable positions pay in my industry/area, and my business financial situation. Even if I can't afford a full market-rate salary right now during my growth phase, having that documentation seems crucial for justifying whatever salary I do set. Has anyone found good resources for researching what "reasonable compensation" actually means for their specific role and industry? I'm trying to figure out if there are standard databases or surveys that the IRS typically references during audits.

As a tax professional who deals with S-Corp audits regularly, I want to emphasize something that hasn't been fully addressed here - the IRS has gotten much more aggressive about this issue in recent years. They've actually developed algorithms to flag S-Corps with active owners who report zero or unusually low W-2 wages compared to their business income. The "reasonable compensation" requirement exists because S-Corp distributions aren't subject to self-employment tax (Social Security/Medicare), while salaries are. If you're working in the business but taking no salary, the IRS sees this as tax avoidance, pure and simple. Here's what I tell my S-Corp clients: even if your business is in a growth phase and cash is tight, you need SOME salary if you're actively working. The IRS would rather see you document a reduced but defensible salary (maybe 60-70% of market rate) with clear business justification, rather than zero salary with the excuse that you're reinvesting everything. Start paying yourself something now, even if it's conservative. Document your reasoning, keep records of comparable positions, and track your hours. This proactive approach will save you significant headaches and penalties down the road.

its ridiculous we have to wait so long for OUR money. the govmt takes it instantly but takes forever to give it back smh

@Dylan Hughes for transcript access, try using ID.me verification on the IRS website - it's usually more reliable than the standard login. You can also call the automated transcript line at 1-800-908-9946 if the website keeps giving errors. The transcript will show cycle codes and DDD (direct deposit date) if one has been issued for your refund. Way more detailed info than the basic "Where's My Amended Return" tool.

Don't forget to consider state taxes too! I learned the hard way that some states (looking at you, New Jersey) have different rules for capital gains offsets than the federal government. I had stock losses I used to offset real estate gains, but NJ limited how much I could offset.

Great discussion here! Just wanted to add a practical tip from my own experience - make sure you have good documentation for all your losses, especially if you're dealing with multiple asset types like stocks and real estate. I had a similar situation last year where I used stock losses to offset real estate gains, but during my tax prep I realized I was missing some key documents like the adjusted basis calculations for my rental property and detailed records of some stock transactions. The IRS can be pretty strict about substantiating your losses, so having everything organized upfront saves a lot of headaches. Also worth noting that if you're using a tax professional, bring all this documentation to them early in the tax season. The interaction between different types of capital gains and losses can get complex, especially when depreciation recapture is involved, and they'll need time to work through the calculations properly.

I've been through this exact same situation! When my amended return showed "completed" but no refund came, I found out there's often a separate review process that happens after completion, especially for larger refund amounts. The IRS doesn't always update their tracking system to show this additional step. In my case, it took an extra 6 weeks after the "completed" date. Since you mentioned needing the money for medical bills, definitely call that number - but here's a trick: call exactly at 7:00 AM EST when they open. The wait times are dramatically shorter. Also, when you get through, ask specifically about "post-completion processing delays" - this shows you understand their system and often gets you more detailed information. One more thing - make sure to check if they have the correct mailing address on file. Sometimes refunds get delayed because they're trying to mail a check to an old address. Hope this helps and you get your refund soon! 🤞

I'm going through something very similar right now! My amended return has been showing "completed" since early December but still no refund. What I've discovered through my research is that there can be a significant gap between the completion status and actually receiving your money - sometimes up to 8-10 weeks during busy periods. Since you filed back in August and it's been completed since November, you're definitely past the normal timeframe. I'd strongly recommend calling that number (800-829-0582, ext 633) but here's what worked for me to get through faster: call at exactly 7:00 AM EST and have your Social Security number, adjusted gross income from your original return, and the exact refund amount ready. Also, before calling, double-check that your address and bank info are current with the IRS. Sometimes refunds get held up because they're trying to send a check to an old address or the direct deposit info doesn't match their records. Given that you need the money for medical bills, don't feel bad about being persistent - this is your money and you have every right to know what's causing the delay!

This is a great example of why getting proper documentation is so crucial. I'd strongly recommend having your client contact the union directly to get a written explanation of what these payments represent. Ask specifically for: 1. The original agreement or settlement terms that created these payments 2. Whether this is strike benefits, back pay, settlement money, or ongoing pension/benefit payments 3. Any documentation showing the time period these payments relate to The fact that she hasn't worked in 6 years makes it almost certain this isn't compensation for current services, which means no SE tax and no EITC eligibility. The chain preparer was likely inflating her refund inappropriately. For future reference, union payments can fall into several categories: - Strike benefits (earned income only if received during active strike) - Settlement payments (usually not earned income) - Pension/benefit distributions (not earned income) - Back pay for past services (depends on timing and circumstances) Without proper documentation, I'd err on the side of treating it as other income rather than risking an audit for improper EITC claims.

This situation highlights a common problem with union-related payments being misreported on tax forms. As others have mentioned, the 1099-NEC form itself doesn't determine the tax treatment - the actual nature of the payment does. Given that your client hasn't worked in 6 years, this is almost certainly some type of settlement, pension distribution, or deferred benefit payment rather than compensation for current services. These payments typically should be reported as "other income" on Line 8i of Form 1040, not as self-employment income. I'd recommend documenting your decision carefully in your workpapers. Note the client's statement about not working, the time gap since employment, and your reasoning for treating it as non-earned income. If the IRS ever questions it, you'll have a clear paper trail showing you made a reasonable, conservative interpretation based on the available facts. The previous preparer's approach was likely incorrect and potentially exposed your client to audit risk. You're absolutely doing the right thing by questioning this treatment, even if it means a smaller refund. Better to file correctly than deal with IRS notices and potential penalties later.