One thing nobody's mentioned yet - make sure your SMLLC actually qualifies for S-Corp status! You need to meet the requirements like having only allowable shareholders (individuals, certain trusts, estates), no more than 100 shareholders, only one class of stock, and not be an ineligible corporation. I've seen people go through this whole process only to find out their LLC wasn't eligible in the first place.

I'm going through a very similar situation right now! Filed as SMLLC for two years, just submitted my Form 2553 late election last month. What really helped me was getting clarity on the "reasonable cause" requirement - I focused on explaining how my business income had grown substantially and I only recently learned about the self-employment tax savings potential of S-Corp status through a tax seminar. One tip I learned: the IRS is generally more lenient if you can show the election makes sense for your current business situation rather than just saying you missed the deadline. Also, I requested an effective date of January 1st of this year (not retroactive) specifically to avoid the headache of amending previous returns. My accountant said this approach has a higher approval rate since it doesn't create extra work for the IRS processing center. Still waiting to hear back, but feeling more confident after reading everyone's experiences here. Good luck with yours!

Anyone recommend a good tax software that handles rental property sales well? I tried TurboTax last year and it totally messed up my depreciation recapture calculations.

I went through a similar situation last year and learned some hard lessons about capital gains planning. While you can't directly offset the gains from your sold property with improvements to other properties, there are still some strategies worth considering for your current situation. First, make sure you're properly accounting for all the capital improvements you made to the property you just sold - these should increase your basis and reduce your taxable gain. Things like major renovations, roof replacement, HVAC systems, etc. can all be added to your cost basis. For your other properties, those improvements you're planning ($7,800 for flooring, $9,200 for the deck) will still benefit you tax-wise through depreciation over time. Just make sure to keep detailed records and receipts for everything. One thing to consider: if you have other investments showing losses this year, you might be able to harvest some capital losses to offset your rental property gains. Also, depending on your income level, you might qualify for the 0% capital gains rate on a portion of your gain. The tax code around rental properties is complex, so it might be worth consulting with a tax professional who specializes in real estate to make sure you're not missing any legitimate strategies for your specific situation.

Don't forget about state filings too! Everyone's talking about the federal forms, but depending on your state, you might also need to file state versions of unemployment tax returns and wage reports. Many states have their own online portals for this. I learned this the hard way when I got hit with penalties for missing my state filings even though I did all the federal ones!

Great advice from everyone here! I just wanted to add one more resource that might help - the IRS website has a really helpful "Forms and Pubs" search where you can find the specific instructions for each form. For your situation specifically: The **Form 940 instructions** have a section on electronic filing options and penalty relief for reasonable cause. Since you made all your payments on time, you're in a much better position for penalty abatement. For the **W-2 late filing**, definitely include a letter explaining why you filed late when you submit through the SSA portal. The IRS considers things like "first-time filer," "family emergency," or "relied on professional who failed to file" as reasonable cause. One thing I haven't seen mentioned yet - make sure you also give yourself (the employee) a copy of the W-2 before you file your personal taxes. You'll need it for your 1040, and having everything consistent between your business and personal returns will save you headaches later. The electronic filing options people mentioned are definitely your best bet. Even if you end up paying some penalties, it's way better than that $675 quote!

22 Has anyone here actually been audited over the self-employed health insurance deduction? I'm worried about claiming it wrong and getting in trouble.

I went through this same situation last year and can confirm what others have said - you can absolutely deduct the portion you pay out of pocket after the premium tax credit. The key is keeping good records. What helped me was creating a simple spreadsheet tracking my monthly premiums, the advance premium tax credit amounts, and what I actually paid each month. When tax time came, I had clear documentation showing exactly what portion was deductible. One additional tip - if you have any months where you didn't receive the advance credit (maybe due to income changes), those full premium amounts are deductible for those months. The IRS allows you to deduct any premiums you actually paid, regardless of whether you were eligible for credits you didn't receive. Make sure to reconcile everything on Form 8962 when you file - this ensures your actual income aligns with the premium tax credit you received throughout the year.

As a tax professional who's worked with hundreds of C corp clients over the past decade, I can confirm what several others have mentioned - the "reasonable compensation" rules are indeed applied very differently for C corps versus S corps. The key distinction is that with S corps, the IRS aggressively pursues cases where owner-employees pay themselves too little salary (to avoid SE taxes), while with C corps, they're generally more concerned with excessive compensation that reduces corporate taxable income. For your situation with $430k in business income and a $125k salary, you're actually in a very defensible position. That's roughly a 29% salary-to-revenue ratio, which aligns well with industry standards for professional services businesses. A few practical considerations for your decision: 1) Maintaining adequate salary protects your Social Security benefits calculation 2) Higher salary allows for better retirement plan contributions (401k, etc.) 3) Consistent salary structure helps establish business legitimacy for potential audits While you technically could reduce your salary significantly without violating specific C corp rules, your current structure provides good balance between tax efficiency and business credibility. I'd recommend documenting your salary determination with industry compensation surveys to support your position if ever questioned.

This has been such an enlightening discussion! As someone who's been wrestling with C corp compensation strategy for my own business, I really appreciate everyone sharing their experiences and expertise. What strikes me most is how different the practical reality is from what you find in generic online advice. The distinction between S corp and C corp reasonable compensation rules is so much clearer now - S corps need to worry about paying too little (to avoid SE taxes), while C corps generally need to worry about paying too much (to avoid reducing corporate income). Dylan, your current $125k salary on $430k revenue actually seems really well-balanced based on all the insights shared here. You're hitting that sweet spot of tax efficiency while maintaining business credibility for potential audits, loans, and long-term financial planning. The state tax considerations that Alexis brought up are particularly important - it really shows how federal tax optimization advice might not be optimal when you factor in state-specific rules. And Malik's point about lending implications is something I never would have considered but makes total sense. For anyone else dealing with similar C corp compensation questions, it seems like the key takeaways are: document your reasoning with industry surveys, maintain enough salary for retirement planning and Social Security benefits, and remember that overly aggressive salary minimization can create problems beyond just tax issues. Thanks to everyone who shared their real-world experiences - this kind of practical insight is so much more valuable than theoretical tax advice!