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Great discussion here! Just wanted to add another perspective as someone who's been running an S Corp for 5 years. The salary vs distribution strategy really does work, but documentation is key. I keep detailed records showing how I determined my "reasonable salary" - industry salary surveys, job postings for similar roles, and notes from my accountant. One thing I learned is to be conservative in your first couple years. The IRS seems to pay more attention to newer S Corps, especially those with large distribution-to-salary ratios. I started with a higher salary percentage and gradually optimized it as my business matured. Also, make sure your corporate formalities are solid - separate bank accounts, proper board resolutions, etc. The IRS is more likely to respect the S Corp structure if you actually treat it like a corporation. The tax savings are real though - I save about $8,000-10,000 annually in self-employment taxes compared to when I was a sole proprietor.
This is really helpful advice, especially about being conservative in the early years. I'm new to S Corps and worried about getting the salary/distribution split wrong. When you say "gradually optimized it" - did you make changes year by year based on business performance, or did you wait a few years before adjusting? Also, what kind of board resolutions do you maintain for a single-owner S Corp? I want to make sure I'm covering all the formality bases from the start.
As a tax professional, I want to emphasize something that's been touched on but bears repeating: the "reasonable salary" requirement is absolutely critical and the IRS takes it seriously. I've seen too many S Corp owners get into trouble by trying to minimize their salary too aggressively. For web design services at your revenue level, $65K is likely in a good range, but you should document how you arrived at that number. Look at Bureau of Labor Statistics data, industry salary surveys, and local job postings for similar roles. The IRS uses a "facts and circumstances" test that considers your education, experience, time devoted to the business, duties performed, and what an independent third party would pay for the same services. One red flag the IRS watches for is a very low salary relative to distributions - if you're paying yourself $30K but taking $120K in distributions, that's going to raise eyebrows. Your current split seems reasonable. Also remember that reasonable compensation can change as your business grows - if you're generating significantly more revenue in future years, your salary should probably increase accordingly. The tax savings are real and legitimate when done properly, but always err on the side of caution with salary levels. The penalties for getting it wrong can be substantial.
This is exactly the kind of professional guidance I was hoping to find! As someone just starting with an S Corp, the documentation aspect seems crucial but overwhelming. You mentioned Bureau of Labor Statistics data and industry surveys - are there specific resources you'd recommend for finding reliable salary data? I want to make sure I'm using sources the IRS would respect if they ever questioned my salary determination. Also, should I be updating this documentation annually or just when I make significant changes to my compensation structure?
This is why I switched to doing everything myself. These tax prep places are getting worse every year with their hidden fees and sketchy practices
This happened to my sister too! Jackson Hewitt did the same thing - took her entire state refund without any heads up. She only found out when she called the state asking where her money was. It's honestly criminal how they hide this in the fine print but tell you verbally that it's "just from federal." Filing a complaint with the Better Business Bureau might help others avoid this trap.
I've been using TurboTax for about 3 years now and honestly, their blue bar is more of a psychological comfort than a reliable predictor. In my experience, it's been accurate maybe 60% of the time - close enough to give you hope but not reliable enough to plan around. The thing is, TurboTax can only estimate based on when your return was accepted and the IRS's stated processing times. They have zero visibility into what's actually happening to your specific return once it hits the IRS systems. So if there's any kind of review, verification, or even just a backlog at the processing center handling your return, that estimate goes out the window. My advice? Use the blue bar as a rough guideline but don't stress if the date comes and goes. The official IRS "Where's My Refund" tool is really your best bet for actual status updates, even though it's frustratingly vague most of the time. And remember, the 21-day processing time is their goal, not a guarantee - especially during peak season when they're swamped.
I can relate to that anxious checking every hour! I've been using TurboTax for the past few years and I'd say their blue bar estimates are hit-or-miss. Sometimes they're spot on, other times they can be off by a week or more. The fact that you already got your state refund is actually a good sign - it means there weren't any obvious red flags with your filing information. Federal refunds just take longer because the IRS processes way more volume than state agencies. My experience has been that if TurboTax says your refund should arrive "today" and it doesn't show up, it usually means you're looking at maybe 3-5 more days rather than weeks. The blue bar tends to be optimistic rather than conservative with their timing. Keep trying the "Where's My Refund" tool on IRS.gov - it gets updated overnight so checking once per day is plenty. And try not to stress too much (easier said than done, I know!) - as long as you filed everything correctly, your refund will come through eventually!
As someone who's dealt with similar work expense questions, I'd definitely recommend the employer route first before worrying about tax deductions. Construction companies are usually pretty responsive to safety-related requests, especially when you can point to potential liability issues. You might also want to document your sunscreen purchases and keep receipts just in case the tax laws change after 2025 when some of those suspended deductions might come back. Even if you can't use them now, having good records could be helpful later. Another thought - if you end up having any skin issues from sun exposure at work, those medical expenses might be deductible if they're significant enough. Not that anyone wants to deal with that, but it's worth knowing your options.
Great advice about keeping records! I've been in similar situations where I wished I had better documentation later. One thing I'd add - if you do go the employer route and they agree to provide sunscreen, make sure to get it in writing as part of their safety policy. That way there's no confusion if management changes or if someone tries to take it away later. Also protects the company from potential workers' comp claims if someone gets sun damage because proper protection wasn't provided.
I work for a tax preparation service and see questions like this all the time. The unfortunate reality is that as a W-2 employee, you're pretty much out of luck for deducting the sunscreen under current tax law. The Tax Cuts and Jobs Act really limited options for unreimbursed employee expenses. However, I'd strongly encourage you to approach this from the workplace safety angle that others have mentioned. In California's extreme heat, employers have heightened responsibilities under Cal/OSHA regulations. You could frame this as a heat illness prevention measure - prolonged sun exposure contributes to heat-related illnesses, and sunscreen is a basic protective measure. I'd suggest putting together a brief proposal for your supervisor highlighting: 1) The cost-effectiveness of bulk sunscreen vs individual purchases, 2) Potential liability reduction for the company, and 3) How it fits into existing safety protocols. Most construction companies would rather spend a few hundred dollars on sunscreen than deal with workers' comp claims or OSHA citations. If they refuse, at least keep detailed records of your purchases. Tax laws could change, and having good documentation never hurts.
This is really comprehensive advice, thank you! I especially appreciate the point about framing it as heat illness prevention - I hadn't thought about connecting sunscreen to Cal/OSHA's heat regulations. That's actually a really smart angle since sun exposure definitely makes the heat feel more intense and exhausting. I'm going to put together that proposal you suggested. Do you think it would help to include some actual cost comparisons? Like showing them what the company would spend on bulk sunscreen versus what we're all spending individually? And maybe throw in some statistics about construction worker skin cancer rates? Also, just to confirm - even if I can't deduct it now, there's a chance those employee expense deductions could come back after 2025? Worth keeping those receipts organized just in case?
Jasmine Hancock
Maybe try reaching out to your local congressperson's office? They sometimes have ways to expedite IRS issues for constituents.
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Nathaniel Stewart
I've been dealing with similar issues! What worked for me was calling the practitioner priority line (if you have a tax pro helping you) or trying the automated callback feature - you can request a callback instead of staying on hold. Also, for transcript errors, try accessing them through different browsers or clearing your cache. Sometimes it's just a technical glitch on their website. The IRS2Go mobile app sometimes works better than the website too. Don't give up - I know it's super frustrating but you'll get through eventually!
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Lia Quinn
ā¢This is really helpful advice, thanks! I didn't know about the automated callback feature - that sounds like a game changer. How long did you typically have to wait for them to call you back? And did you find the mobile app more reliable than the website for getting transcripts?
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