Something nobody mentioned yet - make sure your accounting software is set up correctly to track your S-corp transactions properly! I messed this up my first year and had a nightmare fixing it at tax time. For QuickBooks, you should have your S-corp set up as a separate company file, not just running everything through your personal books. And make sure you're tracking your salary payments as actual payroll with proper withholding, not just as owner draws. This makes a huge difference when it's time to prepare your 1120-S and K-1.

I went through this exact same confusion when I first elected S-corp status for my single-member LLC! Yes, you absolutely need the K-1 - it's how your business income gets reported on your personal return. Here's what I wish someone had told me upfront: even though you're the sole owner, the S-corp election creates a separate tax entity. Your business files Form 1120-S, which generates a Schedule K-1 that shows your share of business income, deductions, and credits. You then take that K-1 and use it when filing your personal Form 1040. Given your numbers ($145K revenue, $72K salary, $43K distributions), it sounds like you have the salary vs. distribution split in a reasonable range, which is good. The IRS does scrutinize S-corps to ensure owner-employees are paying themselves reasonable compensation. For software, TurboTax Home & Business can handle entering K-1 information on your personal return, but you'll need business tax software (like TurboTax Business or similar) to actually prepare the 1120-S that generates your K-1. Many people in your situation find it worth paying a professional for the business return and then doing their personal return themselves. Don't skip the K-1 - it's required and the IRS will definitely notice if your personal return doesn't match what your S-corp is reporting!

This is such a helpful thread! I'm dealing with a similar situation - considering a $22,000 loan to my daughter for her small business startup. Reading through all these responses, it sounds like the key points are: 1. Charge at least the AFR rate to avoid imputed interest issues 2. Document everything properly with a promissory note 3. Consider the gift strategy to offset interest payments 4. Make sure it's legally enforceable in your state One question I have that I don't think was fully addressed - if the loan is for business purposes, does that change any of the tax implications? I'm wondering if there are different rules when the family member is using the money for business investment versus personal expenses like home purchases or education. Also, for those who used the various services mentioned (taxr.ai, claimyr), did you find the cost was worth it compared to just consulting with a local tax professional? I'm trying to weigh whether to handle this myself with online tools or bite the bullet and pay for professional advice.

One thing I'd add that hasn't been mentioned yet - make sure to keep detailed records of all payments received. The IRS can audit family loans, especially larger ones like yours at $19,000, and they'll want to see that it's being treated as a legitimate loan rather than a disguised gift. I learned this the hard way when my family loan got selected for audit. Even though we had a promissory note, I hadn't been tracking payments systematically. The IRS agent wanted to see bank records showing regular payments being made according to the agreed schedule. Fortunately everything worked out, but it would have been much smoother if I'd kept better documentation from the start. Also consider setting up automatic transfers for the payments if possible - it creates a clear paper trail and removes any awkwardness around asking for payments. Your brother-in-law can set up a monthly auto-transfer from his account to yours, which makes it feel more businesslike and less personal.

Definitely don't add it to next year's taxes! Each tax year is separate, and putting income from 2024 on your 2025 return would technically be incorrect for both years. Just wait for the IRS notice. And FWIW I work at a bank - we're required to issue 1099-INTs for any interest of $10 or more, but we're also supposed to send paper copies unless you specifically opted for electronic statements only. Worth checking your bank settings for next year!

Don't stress too much about this! As others have mentioned, the IRS will likely catch this automatically through their matching system since banks report all 1099-INTs directly to them. For such a small amount ($43), you'll probably just get a notice in a few months adjusting your tax liability. The actual tax impact is minimal - even if you're in a higher tax bracket, we're talking about maybe $10-15 in additional tax owed. The IRS generally doesn't impose penalties for small, honest oversights like this, especially when it's clear there was no intent to evade taxes. I'd recommend just waiting for their adjustment notice rather than filing an amended return. The cost and hassle of amending isn't worth it for this amount. Keep good records of this situation in case you need to reference it later, and maybe set a reminder to double-check all your online banking portals before filing next year!

Has anyone used any of the mainstream tax software solutions like Avalara or TaxJar for handling the VDA process? We're trying to decide if we should go with specialized help or if the regular tax software companies have good VDA support.

This is exactly the situation my small manufacturing company went through last year. We had similar issues with high-value products pushing us over nexus thresholds in multiple states despite relatively low transaction volumes. One thing that really helped us was creating a comprehensive spreadsheet documenting every customer interaction regarding exemption certificates. We included dates of requests, methods of contact (email, phone, certified mail), and their responses (or lack thereof). This documentation became crucial during our VDA negotiations. For customers who were clearly resellers but wouldn't provide certificates, we gathered alternative evidence: their business licenses from state databases, screenshots of their websites showing they resell products, and invoices showing consistent business purchasing patterns over multiple years. Several states accepted this as reasonable evidence of exempt transactions. The key insight we learned was that state tax authorities are generally reasonable during VDA processes if you can demonstrate good faith effort and provide logical explanations for why sales were exempt. They understand that businesses sometimes have uncooperative customers. I'd recommend prioritizing your VDA filings by states with the highest potential liability first, and don't let perfect documentation prevent you from moving forward. The penalty relief from VDAs is significant, but only if you act before they contact you.

One thing to keep in mind about the timing - if you do decide to hold onto those I-bonds for college, make sure you track when they were issued and their final maturity dates. EE bonds stop earning interest after 30 years, and I-bonds stop after 30 years too. If your bonds reach final maturity before your daughter starts college, you'll be forced to report all the interest as income regardless of whether you use the money for education. I learned this the hard way when some of my older EE bonds from the 1990s hit their 30-year mark. The IRS sent me a 1099-INT for the full interest amount even though I hadn't cashed them in yet. So if you're planning to use bonds for college in 10+ years, double-check that they won't mature before then, or you might lose the education tax benefit entirely. Also worth noting - the education exclusion only applies to the bond interest, not the principal. So if you paid $5,000 for bonds that are now worth $8,000, only the $3,000 in interest can potentially qualify for the tax exclusion, not the full redemption amount.

This thread has been incredibly helpful! I'm in a similar situation with bonds purchased between 2010-2015 that I was considering using for my son's private middle school. After reading all these responses, I'm definitely going to: 1. Keep the bonds for college expenses when they'll actually qualify for tax benefits 2. Max out our 529 plan for the $10K K-12 tuition benefit 3. Check with my employer about dependent care FSA options for additional costs One question I haven't seen addressed - if I have bonds that will mature right around when my son starts college (say 2035), is there any flexibility in the timing? Like if some bonds mature in his freshman year but I don't need all the money until junior/senior year, can I still get the education exclusion on bonds that matured in earlier years? Or does the exclusion have to be claimed in the same tax year the bonds mature or are redeemed?