One thing to consider is whether traditional or Roth is better for your spouse's IRA. With your household MAGI at $47k, you're in a relatively low tax bracket now. It might make more sense to pay the tax now (go with Roth) rather than deduct it (traditional). The benefit would be tax-free growth and withdrawals in retirement when you might be in a higher tax bracket. Just something to think about!

Just wanted to jump in here as someone who went through this exact situation two years ago. Your brother-in-law is definitely wrong on this one! The spousal IRA is one of the best-kept secrets in tax planning for single-income households. At your income level of $47k, you can absolutely make fully deductible traditional IRA contributions for both yourself AND your non-working spouse - up to $7,000 each for 2024 (assuming you're both under 50). A few practical tips from my experience: 1. You can make the contribution right up until the tax filing deadline (April 15, 2025 for 2024 taxes) 2. Most major brokerages (Fidelity, Vanguard, Schwab) make it super easy to open a spousal IRA online 3. Don't forget you can also do this for previous tax years if you missed it - you have until the filing deadline to contribute for the prior year This could save you around $2,800 in taxes if you max out both IRAs ($14,000 total contribution × your tax rate). That's a significant chunk of change for a family with young kids!

Welcome to the high-tax club! I'm also a recent grad in California and went through the exact same shock. A few things that helped me understand what was happening: First, that 31% includes both your portion AND what feels like every tax California can think of. You've got federal income tax (probably around 12% at your salary), California state income tax (6-9% depending on your exact income), Social Security (6.2%), Medicare (1.45%), and that SDI (State Disability Insurance) at about 1.1%. The good news is you'll likely get some of this back when you file taxes, especially if you have student loan interest, contributed to a 401k, or qualify for other deductions. I got back about $2,800 my first year. Also check if your employer offers pre-tax benefits like health insurance, HSA, or 401k contributions - these reduce your taxable income and can lower your withholding. Even contributing just 3% to a 401k would save you money on taxes while building retirement savings. It sucks seeing such small paychecks, but you're not alone! California is expensive but the career opportunities often make up for it in the long run.

I feel your pain! Just went through this exact same situation last year when I started my first job in San Francisco at $58k. That 31% withholding rate hit me like a truck too. Here's what I learned: California really does have some of the highest tax rates in the country, but there are legitimate ways to optimize your situation. First, double-check that you filled out your W-4 correctly - the new form can be confusing and small mistakes can cost you hundreds per month. Second, if your employer offers a 401k with matching, definitely take advantage of it even if money is tight. Contributing even 3-4% pre-tax will reduce your taxable income and lower your withholding immediately. For example, on a $55k salary, contributing 3% ($1,650/year) could save you roughly $400-500 in taxes, which comes back to you throughout the year in smaller withholdings. Also look into whether you qualify for the California Earned Income Credit or other state credits. And keep track of any work-related expenses, student loan interest, or other deductible items. The first year is always the hardest financially, but once you get your withholdings optimized and understand the system better, it gets much more manageable. Hang in there!

Has anyone considered the F reorganization approach? IRC Section 368(a)(1)(F) provides for a "mere change in identity, form, or place of organization of one corporation, however effected." You could potentially form a new S corporation and have it acquire the C corporation in an F reorganization. This would effectively convert the C corporation to an S corporation while potentially providing more flexibility than a direct conversion.

One strategy worth exploring is a gradual distribution approach over several years rather than trying to access all the accumulated earnings at once. Since you're the sole shareholder, you have complete control over the timing. You could take reasonable salary payments (which are deductible to the corporation), combined with modest dividend distributions spread over multiple tax years to manage your overall tax bracket. This won't eliminate the double taxation on accumulated E&P, but it can significantly reduce the overall tax burden by keeping you in lower marginal tax brackets. Another consideration is whether the corporation has any business expenses or investments that could be made before distributions - things like equipment purchases, facility improvements, or even funding a corporate retirement plan. These legitimate business expenses reduce the accumulated E&P and give you more tax-efficient ways to benefit from the corporate assets. The key is that there's no magic bullet to completely avoid tax on C corp accumulated earnings - the tax code specifically prevents this. But with proper planning, you can minimize the total tax impact through timing and strategic use of corporate funds.

Has anyone successfully e-filed in this situation? I'm wondering if reporting partial 1099 income that belongs to someone else's SSN might cause the e-file to be rejected, or if I need to file by mail with attachments explaining the situation.

I'm dealing with a very similar situation right now with my Herbalife business during my divorce proceedings. What really helped me was creating a detailed spreadsheet showing exactly how we split the work and expenses throughout the year - things like who attended training events, who maintained customer relationships, who paid for inventory, etc. This documentation became crucial when determining our income split percentage. We ended up with a 65/35 split rather than 50/50 because I handled most of the customer service and product orders. My tax preparer said having this level of detail would be invaluable if the IRS ever questioned our separate filings. One thing I'd add - make sure you coordinate with your spouse about who's claiming which business expenses. We almost double-claimed some training costs because we weren't communicating well during the separation. Document everything and keep copies of all receipts with notes about who actually paid for what.

One thing I learned the hard way - if you donate a fully depreciated business vehicle to charity, you generally can't claim a deduction based on the fair market value. Since your basis is $0, your deduction is typically $0 as well, unless the charity plans to use the vehicle directly for its charitable purpose. IRS rules for vehicle donations got much stricter after 2004. So while donation might sound nice, it might not give you any tax benefit. Selling or trading in for a new business vehicle is usually more advantageous tax-wise.

I went through this exact situation with my electrician business truck last year. After getting fully depreciated to $0, I was dreading the tax hit from selling it. What ended up working best for me was keeping detailed records of all repairs and maintenance costs in the final years - my accountant was able to use these as additional business deductions to help offset some of the recapture income. Also, timing matters a lot. If you're expecting a lower income year coming up, that might be the perfect time to sell since the recapture will be taxed at your ordinary income rate. In my case, I waited until a slower business year and the effective tax rate on the recapture was lower than it would have been during my peak earning years. One more tip - if you're planning to buy another business vehicle anyway, definitely look into the 1031 exchange option others mentioned. The paperwork is a bit more complex but the tax deferral can be significant.