Just want to point out that depending on the type of business entity, there might be restrictions on which accounting method is allowed. C-corps with over $27 million in gross receipts generally must use accrual. Also, certain types of businesses like those with inventory often have specific requirements.

This is definitely a tricky situation, but you're right to be concerned about fixing it properly. From my experience, the key question is whether the difference between what you reported (using accrual numbers) versus what cash basis would have shown is material. If we're talking about significant differences in taxable income, then amending is really your safest bet. The IRS takes accounting method consistency seriously, and having a mismatch between your declared method and actual reporting can cause issues down the road, especially if audited. One thing to consider is the timing - if you're still within the statute of limitations for amendment, it's better to proactively fix this rather than hope it doesn't come up later. I'd recommend calculating what the cash basis numbers would have been and comparing the tax impact. If it's material, bite the bullet and amend. If it's relatively minor, you might have more flexibility, but document your reasoning either way. Have you looked into whether your client meets any of the requirements that would actually require them to use accrual method? Sometimes what seems like a mistake might actually point to a method change that was needed anyway.

Does anyone know if the employee retention credit can still be claimed on Form 3800 for 2023? I'm getting conflicting information. Some places say it ended in 2021, others say there were extensions.

I've been dealing with Form 3800 for my small marketing agency and wanted to share a few things that helped me get through it successfully. The biggest breakthrough was realizing that Form 3800 is really just a summary form - you have to complete all the underlying credit forms first. For Sofia's situation with R&D expenses, definitely start with Form 6765 (Research Credit) before touching Form 3800. The key is documenting that your software development involved genuine technical uncertainty and experimentation. Keep detailed records of problems you encountered, different approaches you tried, and how you tested solutions. One tip that saved me hours: create a simple spreadsheet listing all potential business credits and check which ones apply to your business type and activities. Common ones for small businesses include the Small Employer Health Insurance Credit, Work Opportunity Credit, and Research Credit. Don't assume you don't qualify - I missed out on credits for two years because I thought my business was "too small." Also, if this is your first time claiming significant credits, consider getting a consultation with a tax professional just to review your work before filing. The documentation requirements can be tricky, and an audit on business credits is much more intensive than a regular tax audit.

This thread has been incredibly helpful! I'm in a very similar situation - my partner makes about $5,800 annually, so just over the dependent threshold. One thing I wanted to add that I learned from my benefits administrator: make sure you understand whether your employer calculates imputed income based on the full premium cost or just their contribution portion. My company only counts their subsidy as imputed income, not the total premium cost, which made a significant difference in my tax impact. Also, for anyone considering this, don't forget that some employers offer flexible spending accounts (FSA) that can help offset some of the additional tax burden. Even though the imputed income for your partner's coverage is taxable, you can still use pre-tax FSA dollars for their medical expenses. Has anyone here dealt with how this affects state taxes? I'm in California and trying to figure out if the state follows the same rules as federal for domestic partner coverage taxation.

I went through this exact situation two years ago and wanted to share a few additional considerations that might help. My partner makes around $6,200 annually, so like yours, just over the IRS dependent threshold. One thing that surprised me was how the timing of enrollment affected my taxes. I added my partner mid-year (July), so I only had imputed income for half the year. This actually helped me ease into understanding how it would impact my overall tax situation before committing to a full year. Also, make sure to ask your benefits administrator about the "look-back" period if your partner's income fluctuates. Some employers will reassess domestic partner eligibility annually based on the previous year's income, while others look at projected current year income. This could matter if your partner's income changes significantly from year to year. Another practical tip: if you're using direct deposit, the imputed income will show up in your regular paycheck deposits, so your take-home might be less than expected even though your gross pay appears higher on your paystub. I had to adjust my budget when I first noticed this. The good news is that even with the extra tax burden, it was still much cheaper than my partner getting individual coverage through the marketplace. Just make sure you factor in the full annual impact when making your decision!

I totally missed the Savers Credit last year when I filed with FreeTaxUSA. Would it be worth filing an amended return? I put about $1,800 into my Roth IRA last year and my income was around $32,000.

This is such an important reminder! I work in HR and see this all the time - employees contributing to their 401k through payroll deduction but completely unaware they could be getting additional tax credits for it. What's really frustrating is that many tax prep services don't always catch this either, especially the cheaper online options. I've started mentioning the Savers Credit during our annual benefits enrollment meetings because so many of our lower-income employees qualify but never claim it. One thing to add - if you're married and both spouses contribute to retirement accounts, you can potentially get the credit for both contributions (up to the annual limits). And remember, even small contributions count! You don't need to max out your retirement account to benefit from this credit.

This is a great question and I can see why it's confusing! I went through something very similar with my dental practice setup. One crucial thing to double-check is the timing for 2024 tax benefits. While the plan needs to be established by December 31, 2024, you actually have until your S Corp's tax filing deadline (including extensions, so potentially October 15, 2025) to make the actual contributions and still get the 2024 tax deduction. Also, don't feel embarrassed about asking your accountant again! This stuff is genuinely complex, and even tax professionals sometimes need to research the specifics. I'd recommend framing it as "I want to make sure I understand the implementation steps correctly" rather than asking for the explanation again. One practical tip: when you do set this up, make sure your S Corp payroll system can handle the timing of the profit sharing contributions. Some payroll providers need advance notice to process these correctly, especially if you're making the contribution near the filing deadline. I learned this the hard way when my payroll company needed three weeks to set up the proper coding! The separate entity approach really does work well for situations like yours - it gives you much more control over your retirement planning without getting tangled up in the LLC's existing arrangements.

This is such a helpful discussion! I'm actually an enrolled agent who works with a lot of medical professionals in similar situations, and I wanted to add a few key points that might help clarify things: First, regarding the controlled group rules that several people mentioned - this is absolutely critical to get right. Since your husband has 50% ownership in the LLC through his S Corp, you'll definitely need to consider the aggregation rules for contribution limits. The good news is that profit sharing contributions are calculated separately from 401(k) deferrals, but the total combined contributions across all plans are still subject to the annual limits. Second, I'd strongly recommend getting a formal plan document review before implementing anything. While the concept is straightforward (S Corp establishes profit sharing plan for its employee), the execution involves specific language around eligibility, vesting schedules, and distribution rules that need to comply with ERISA requirements. One thing I haven't seen mentioned is the potential impact on your husband's Social Security benefits calculation. Since profit sharing contributions reduce current W-2 income, there could be a long-term trade-off between current tax savings and future Social Security benefits. For most people the current tax savings win out, but it's worth considering especially for younger professionals. Also, make sure to factor in the ongoing administrative costs - annual Form 5500 filing, potential audits if assets exceed $250k, and TPA fees. These costs are usually worth it for the tax savings, but good to budget for them upfront. Feel free to reach out if you need any clarification on the compliance aspects!