Great question! I actually dealt with this exact scenario when I helped set up a promotional sale for a local retailer. The key thing to remember is that sales tax is calculated on the actual selling price, not the original retail price. For your 1-cent item with a 7.25% tax rate, the calculation would be $0.01 × 0.0725 = $0.000725, which rounds to $0.00. So effectively, no sales tax would be collected on that individual penny item. However, make sure you understand your state's specific rounding rules - some states round at the line-item level while others round at the total transaction level. Most modern POS systems handle this automatically, but it's worth double-checking your settings. Also, keep good records of your promotional pricing for your own business analysis, even though from a tax standpoint it's treated just like any other sale. The promotional price is your actual revenue for tax reporting purposes. Good luck with driving foot traffic to your shop!

This is such a timely question! I just went through this exact situation with my small electronics repair shop when I did a "penny part" promotion last month. What I learned is that you're absolutely right to think about this carefully - the tax calculation on ultra-low prices can be confusing. In my experience, most POS systems handle this by calculating tax on the total transaction amount and rounding to the nearest cent. So your 1-cent item at 7.25% would indeed result in zero tax collected for that individual item. However, I'd recommend calling your state's sales tax department to confirm the specific rounding rules in your jurisdiction, since they can vary. One tip: I found it helpful to run a few test transactions through my POS system before launching the promotion to see exactly how it handles the calculations. That way you'll know what to expect and can explain it to customers if they ask. Also, keep detailed records of the promotion period for your own business analysis - it's useful data even if the tax implications are minimal. The promotion worked great for driving foot traffic, by the way! Hope yours does too.

Has anyone used Vanguard or Fidelity for their solo 401k or other small business retirement plans? Do they help with setup?

I went through this same decision process last year for my S Corp. After researching extensively and consulting with a retirement plan specialist, I ended up going with a Solo 401(k) instead of a Keogh Plan. Here's what I learned: Keogh Plans are largely obsolete for S Corps. The term "Keogh" technically refers to qualified plans for self-employed individuals, but since S Corp owners are employees of their corporation (even if they're the sole owner), you don't qualify for traditional Keogh arrangements anyway. For S Corps, your main options are: 1. Solo 401(k) - Simple setup, high contribution limits, minimal admin costs 2. Traditional 401(k) with profit sharing - If you have employees 3. SEP IRA - Easy but lower contribution limits 4. Defined benefit plan - Complex but highest contribution potential The Solo 401(k) ended up being perfect for my situation. I set mine up through Schwab in about 2 weeks, and I can contribute up to $69,000 annually (2024 limits) between employee deferrals and employer contributions. No Form 5500 filing required until assets hit $250k. Skip the Keogh research rabbit hole - focus on Solo 401(k) vs. other modern options that actually apply to S Corps.

One thing I'd add that hasn't been mentioned yet - make sure to check if Colombia has any specific inheritance tax or reporting requirements that could affect the timing or structure of the inheritance. Some countries require certain paperwork to be filed before assets can be transferred to foreign heirs. Also, since you're dealing with beachfront property, consider whether there might be any restrictions on foreign ownership in Colombia that could complicate the inheritance process. Some countries have limitations on non-residents owning coastal property. It might be worth consulting with a Colombian attorney or tax advisor who specializes in cross-border inheritances to make sure everything is handled properly on both sides. The last thing you want is to have compliance issues in Colombia that could delay or complicate receiving the inheritance, especially when you're trying to plan for US reporting requirements. Good luck with everything - foreign inheritance can be complicated but it sounds like you're being proactive about understanding the requirements!

Just wanted to add another perspective on the timing aspect that might be helpful. When my father-in-law passed away in the Philippines, we discovered that the fair market value for US tax purposes is determined on the date you actually receive the inheritance, not when the person passes away or when the will is read. This ended up being important because there was about an 18-month delay between his death and when we actually received the property due to Philippine probate procedures. The property value had increased significantly during that time, which pushed us over the $100k threshold for Form 3520 reporting. So even though your husband's estimated share is currently around $80k, if there are delays in the Colombian inheritance process and the property appreciates in value, you might end up crossing that reporting threshold by the time you actually receive it. It might be worth keeping track of the property's value over time and having a plan for Form 3520 filing just in case. Better to be prepared than caught off guard if the inheritance ends up being larger than expected when it's finally received.

One aspect that hasn't been mentioned yet is retirement planning. The higher your W-2 income, the more you can contribute to retirement accounts like a Solo 401k. At $800k business income, you might want to consider maxing out your retirement contributions, which would require a higher salary to maximize the employee contribution portion. For 2025, you could potentially put away $23,000 as an employee contribution plus around 25% of your salary as the employer contribution, up to a combined limit of $69,000. This is another factor to consider when determining your reasonable compensation.

This is a great discussion and really helpful to see everyone's perspectives. I'm actually dealing with a similar situation but at a smaller scale - my S-Corp is on track for about $450k this year in IT consulting. What's concerning me is that I've been paying myself only $120k in salary, which after reading this thread seems way too low. The challenge is that most of my clients are on annual contracts, so my income can be pretty lumpy - some quarters are much better than others. Does anyone have advice on how to handle reasonable compensation when your income isn't steady throughout the year? Should I be adjusting my salary quarterly based on performance, or is it better to estimate conservatively at the beginning of the year and then true up with a bonus at the end? Also, @Chloe Taylor makes a great point about retirement planning. I hadn't considered how my salary level affects my 401k contribution limits. That's definitely another factor to weigh when determining the right compensation level.

I'm surprised nobody's mentioned that you can negotiate with your tax professional! When mine tried to charge me $450 for a reasonable compensation report, I asked for a breakdown of what goes into it. Turns out it was mostly pulling data from a subscription database they already pay for and formatting it into a report template. I asked if they could do a more basic version and they agreed to do it for $200 instead. It doesn't have all the fancy graphs and extensive narrative, but it includes the essential salary data for my industry and region with a brief explanation of how my compensation was determined. Another option: if you're using a tax software like TaxSlayer, TurboTax, or H&R Block for your business, some of their higher-tier packages include access to business reports and documentation tools that can help you create your own basic reasonable compensation documentation.

I've been through this exact situation with my S-Corp and ended up doing a hybrid approach that worked well. Instead of paying the full $500 my accountant wanted, I did some research myself first using the Department of Labor's wage data and industry salary surveys, then had my tax professional review my analysis and formalize it into a brief report for $150. The key is making sure you have documentation that shows you researched comparable positions in your industry, location, and company size. I looked at job postings for similar roles, used the Bureau of Labor Statistics Occupational Employment and Wage Statistics, and even checked sites like PayScale and Glassdoor for my specific role. My accountant said this approach was perfectly adequate for IRS purposes - what matters is that you can demonstrate you made a good-faith effort to determine reasonable compensation based on objective market data. The fancy reports are nice to have but not always necessary unless you're in a high-audit-risk situation or taking a very aggressive salary/distribution split. Given that you're paying yourself 50% of profits as salary, you're probably in a reasonable range, but having some documentation is definitely smart for peace of mind.