One thing to watch out for with BC PST - if you're providing digital products or services, the rules can be different than for physical goods. I learned this the hard way last year. For digital services sold to BC customers, you generally need to charge PST. But the same digital service sold to customers outside BC (including US) is PST-exempt. Check out the BC gov website's bulletin PST 107 for the specific rules on telecommunications services which includes digital products. Don't make the same mistake I did and assume digital = exempt!

Quick heads up for anyone with BC small businesses - make sure you're also keeping track of where YOUR suppliers are located. If you're buying stuff from other provinces or internationally, different input tax rules apply. For example, I was buying software from an Ontario company and they were charging me HST, which affects how I claim input tax credits compared to GST. And when I buy from US suppliers, there's no GST/HST charged but I might pay duties or import taxes depending on what I'm buying. Tracking this stuff from day one saves massive headaches at tax time!!

My accountant specifically advised AGAINST filing an S-corp election now for 2023. His reasoning: if your income has just spiked this year, you're better off waiting to implement proper payroll and planning for 2024. We worked out that with only one month left in the year, the compliance cost of retroactive payroll setup, catch-up tax deposits, and amended filings would eat up most of the tax savings. Plus, rushing into it increases the risk of errors that could invalidate your election anyway. For 2024, we're setting up a proper system with quarterly salary payments, regular tax deposits, and everything properly documented from day one. Much cleaner approach.

Just wanted to share my experience - I was in almost identical situation last year. $198k net revenue, single-member LLC, found out about S corps in October. I filed Form 2553 under Rev. Proc. 2013-30 with my tax return for last year. My strategy was setting up payroll for Nov and Dec only, took reasonable salary for those months ($15k total), and documented why this was appropriate given the timing of my election. My S election was accepted without issues. Saved about $4k in taxes even with just 2 months of S-corp status, and now I'm fully set up for this year too. The key was solid documentation explaining the timing of my reasonable compensation decisions.

Slightly off-topic, but make sure you're looking at Total Cost of Ownership, not just the tax benefits. I got excited about the Section 179 deduction last year and bought a $65K truck for my real estate business, thinking I was "saving" a ton on taxes. What I didn't fully account for was: 1) Higher insurance costs (almost $200/month more than my previous vehicle) 2) Terrible fuel economy (I'm spending about $350 more per month on gas) 3) Higher maintenance costs 4) More expensive parking due to the larger size Yes, I got a nice tax deduction, but over 5 years, my TCO is WAY higher than if I'd bought something more modest. The tax tail shouldn't wag the business dog.

Great discussion here! As someone who works in tax preparation, I wanted to add a few practical points that might help Miguel and others considering this decision: First, timing matters more than people realize. Section 179 deductions must be taken in the year the vehicle is "placed in service" - meaning when you start using it for business. If you buy in December but don't start using it until January, you might miss out on a full year of deduction benefits. Second, there are income limitations on Section 179. If your business income is below the deduction amount, you can't create a loss with Section 179 (though you can carry forward unused amounts). This is different from bonus depreciation, which can create losses. Third, for catering specifically, consider whether you actually need a 6,000+ lb vehicle. A well-equipped cargo van might serve your business better and still qualify for significant deductions, while being much more practical for navigating to catering venues and customer locations. Finally, remember that business use percentage applies to EVERYTHING - not just the purchase price, but insurance, fuel, maintenance, etc. If you're honest about your usage being 70% business, that percentage applies to all vehicle-related deductions going forward. The tax benefits are real, but make sure the vehicle choice makes business sense first!

Something nobody's mentioned yet - if you do go with the hardship withdrawal, make sure you understand EXACTLY how much to withhold for taxes. I did this last year and only withheld 20%, thinking that would cover it. BIG mistake. I ended up owing a bunch more at tax time because: 1) the withdrawal pushed me into a higher tax bracket, 2) I still had to pay the 10% penalty separately, and 3) I also owed state taxes on the withdrawal. If I could do it over, I'd have withheld at least 35% to cover federal, state, and the penalty. Or better yet, gone with a 401k loan as others have suggested.

Have you looked into whether your 401k plan allows for loans instead of hardship withdrawals? Many plans let you borrow up to 50% of your balance (max $50,000) for a primary residence purchase. The huge advantage is there's NO tax penalty since it's not a withdrawal - you're borrowing from yourself. You do pay interest, but you're paying it to your own 401k account. Usually you have to repay within 5 years, but some plans extend this to 15-30 years for home purchases. My wife and I did this for our down payment and it worked great. Just be aware that if you leave your job, you'll typically need to repay the full loan quickly or it converts to a distribution with all the penalties.

Does anyone know how the 5 dependency tests work for parents living with adult children? My mom moved in with me last year after Dad passed away. She gets about $1800/month from Social Security but I pay for housing, utilities, groceries, and most of her medical bills not covered by Medicare. Her annual income is about $21,600 which seems high, but I'm definitely providing more than half of her total support when you count everything.

This is such a helpful thread! I'm dealing with my own dependency confusion right now. My 22-year-old brother lives with me and my spouse while he's finishing his master's degree. He works part-time and made about $12,000 last year, but we pay for his housing, utilities, food, and help with tuition costs. The tricky part is he's not a full-time student anymore since he's only taking thesis credits this semester. Does that affect whether I can claim him? I know the age test for qualifying child requires being under 24 AND a full-time student, but I'm not sure how "full-time" is defined when you're just doing research/thesis work. Also, since he's my brother (not my child), would I need to look at the qualifying relative tests instead? The relationship test should be fine since he's my sibling, and I'm pretty sure we provide way more than half his support. Just trying to figure out which set of rules applies here!