One practical difference I haven't seen mentioned - as someone who switched from partnership to S-Corp last year. With guaranteed payments, you need to make quarterly estimated tax payments yourself since there's no withholding. With an S-Corp salary, you have withholding on your W-2 wages which helps avoid underpayment penalties. But distributions from S-Corps still need estimated payments to cover the income tax (just not SE tax). I got confused by this and underpaid last year!

This is such a helpful thread! I'm in a similar situation with my freelance marketing business and have been going back and forth on this decision. One thing I'd add is that the administrative burden is real with S-Corps - you need to run payroll (even for just yourself), file quarterly payroll reports, and keep up with corporate formalities like board resolutions. I calculated that between payroll processing fees, additional accounting costs, and the extra time investment, I'd need to save at least $3,000-4,000 annually in taxes to make the S-Corp election worthwhile. Below that threshold, the LLC simplicity wins out for me. Also worth noting - if you're planning to reinvest profits back into the business for equipment, marketing, etc., the partnership structure might be more flexible since you can adjust distributions more easily than changing S-Corp salary mid-year.

Are any of you using online tax prep software for your C-Corp returns when you actually file? I'm trying to figure out if I should just buy software now and use that to file the extension too, or if that's overkill for just an extension.

As someone who just went through this process last month, I'd strongly recommend e-filing your Form 7004 rather than mailing it, especially if you're cutting it close to the deadline. The IRS free e-file options for business extensions are actually pretty good now. One thing I wish I'd known earlier - even though you're bootstrapping, consider setting aside some cash for the estimated payment. I made the mistake of filing the extension without any payment thinking I could figure it out later, and ended up with interest charges that added up quickly. Even a rough estimate based on your projected profit is better than zero. Also, don't forget to check if your state requires a separate extension filing. Some states automatically extend when you file federal, but others don't. Since you mentioned you're a tech startup, depending on your state's business tax requirements, this could be important to avoid additional penalties. The whole process really doesn't have to be overwhelming - Form 7004 is much simpler than the actual tax return you'll file later!

Has anyone had experience with the Foreign Housing Exclusion/Deduction that goes along with FEIE? I'm moving to London next month and I hear housing costs are insane there. Wondering if this additional exclusion makes FEIE better than FTC in high-cost cities?

Great question! I went through this exact same decision process when I moved back to the US after working in the UK for several years. One key point that hasn't been fully addressed: you mentioned having $13,500 in excess FTC from 2023 - those credits are gold! Since FTC carryovers last 10 years, you can absolutely use them on your 2025 return even though you used FEIE in 2024. This might actually make your decision easier since you'll get immediate benefit from those carried-forward credits. A few additional considerations for your situation: - If you're planning to stay in the US long-term, FTC might make more sense going forward since you won't qualify for FEIE as a US resident - State taxes: some states don't recognize FEIE but do recognize FTC, so if you're in a state with income tax, this could affect your calculation - Alternative Minimum Tax (AMT): FTC can sometimes trigger AMT issues, while FEIE generally doesn't Since you're back in the US for 2025, you probably won't have foreign earned income anyway, so the FEIE vs FTC decision might be moot for this year. Focus on maximizing the use of those carryover credits from 2023! The switching rules are exactly as others described - you can go from FTC to FEIE anytime, but once you revoke FEIE, there's that 5-year waiting period.

Quick tip from someone who's filed 1120-F for 5+ years: Don't forget to include Form 8833 for any treaty-based return positions you're taking. I see so many foreign corps miss this and it immediately flags your return. Also, if you have any US real property interests, make sure you're properly handling Form 8288 withholding requirements. These are audit magnets if handled incorrectly.

Maya, I've been through this exact situation with our UK subsidiary filing 1120-F. A few additional points that might help: For your R&D allocation question, consider maintaining a detailed allocation study that documents not just the methodology but also the business rationale. We had success using a combination approach - gross receipts for general R&D, but direct attribution for specific projects where we could clearly identify US vs. global benefits. Regarding your software licensing revenue question, be very careful here. The IRS has been increasingly scrutinizing income attribution between related entities. If your US operations are involved in customer relationships, technical support, or customization for those licenses, you may have ECI even if the contracts are signed in Japan. Document all US activities related to that revenue stream. One thing I didn't see mentioned - make sure you're considering the branch profits tax implications. With $2.4M in receipts, you're likely subject to it, and proper planning around deemed repatriation can save significant tax. Also, file Form 5472 for related party transactions if you haven't already. Missing this can trigger automatic penalties even if your 1120-F is perfect.

If this is your first time getting a CP2000, make sure you check if they calculated the taxes correctly. Last year they sent me one claiming I owed $4k, but when I looked closely I realized they had double-counted one of my 1099s. Sent in my explanation with documentation and they completely canceled the proposed amount. These notices aren't always accurate!

I went through something very similar last year and want to share what I learned. First, don't panic - these CP2000 notices are super common and usually straightforward to resolve. The key is to carefully review every line on the notice against your actual tax documents. In my case, the IRS had records of a small 1099-MISC that I had completely forgotten about from some freelance work I did. Once I found that document, everything made sense and I just had to pay the additional tax owed plus a small amount of interest. My advice: gather all your tax documents (W-2s, 1099s, bank statements, etc.) and go through them systematically. Look for anything that might match the income amounts the IRS is claiming you didn't report. Sometimes it's something really simple like a forgotten savings account interest statement or a small side job payment. If you find the missing income and the IRS calculation looks correct, it's usually easiest to just pay it. But if you genuinely can't find what they're referring to or you think they made an error, definitely respond with your documentation before the deadline. Don't let it slide - that's when penalties and interest really start to pile up.