Another consideration that might be helpful for your situation is the potential impact of state taxes when you eventually dissolve. Some states have different rules for S corporation liquidations, and a few states don't even recognize S corporation elections, treating them as regular corporations for state tax purposes. Since you mentioned you're accumulating significant cash reserves, you might want to research whether your state has any specific provisions for S corp dissolutions or if there are ways to minimize state tax impact through timing. For instance, if you're in a state with high income taxes, the timing of when that $15k in I bond interest gets recognized could meaningfully affect your overall tax bill. Also, given that you're in financial services, consider whether keeping the S corp structure makes sense long-term even if you're not actively using it. Some advisors maintain dormant S corps for potential future use, especially if they might want to bring on partners or expand services later. The annual compliance costs might be worth it compared to having to set up a new entity down the road. Just make sure you're meeting any minimum state filing requirements to keep the entity in good standing.

I'm dealing with a similar situation but with a twist - I've been operating my S corp in multiple states and I'm concerned about the complexity of multi-state dissolution. Beyond the federal tax implications you've outlined, each state where you're registered or doing business may have different requirements for final tax returns, franchise tax payments, and formal dissolution filings. One thing I've learned is that some states require you to obtain tax clearance certificates before they'll approve the dissolution, which can add weeks to the process if you have any outstanding issues. And if you have employees in multiple states, the payroll tax complications multiply significantly. Have you considered whether your financial advisory practice has any multi-state implications? Even if you're physically located in one state, if you have clients in other states, you might have nexus requirements that could complicate the dissolution process. I'd definitely recommend getting a clear picture of all your state-level obligations before making the final decision on timing. The I bonds strategy is smart for federal purposes, but make sure to check if any of the states where you operate have different rules for how they treat federal obligations for tax purposes.

5 Something similar happened to me last year, but I didn't realize until the IRS sent a notice requesting the missing schedule about 2 months after filing. It didn't result in any penalties, just a delay in processing the return. I just sent in the missing form with their notice, and everything was resolved within a few weeks.

I had a very similar experience with my partnership's 1065 return two years ago when I forgot to include Schedule M-3. Based on what worked for me, I'd recommend sending the Schedule B-2 immediately with a cover letter rather than waiting for the IRS to contact you. Here's exactly what I did: I sent the missing schedule via certified mail with a simple cover letter that included our EIN, tax year, and a brief explanation that the schedule was inadvertently omitted from our original filing dated [specific date]. I marked the envelope clearly with "MISSING SCHEDULE FOR FORM 1065" and our EIN. The key thing is to be proactive. When I waited for the IRS to contact me in a previous year for a different missing form, it delayed our entire return processing by almost 4 months. By sending it proactively, you're much more likely to have it attached to your original return during processing rather than having to go through their correspondence system. One tip: include a copy of page 1 of your 1065 with the missing schedule so they can easily match it to your return. This has helped me avoid issues in the past when dealing with missing attachments.

This is such a valuable resource! I'm getting married in September and have been struggling to understand how our taxes will be affected. My partner and I are both in marketing - I make $85k and they make $95k, so we're in that middle-income range where it's hard to predict the impact. What really caught my attention in this thread is how many different factors can influence the calculation beyond just salary. We both have some freelance income on the side (probably $8-10k each annually) and I'm wondering how that irregular 1099 income might complicate things compared to just W-2 wages. The timing discussion has been eye-opening too - I never realized that getting married in December vs January could make such a difference. We were leaning toward a December wedding for family reasons, but now I'm wondering if we should crunch the numbers first. Brady, your simulator sounds exactly like what we need. The visual graphs would be so helpful for explaining the impact to my partner, who isn't as comfortable with tax concepts. Really hoping you make it publicly available soon - would love to run our specific scenario through it before we finalize our wedding date! Thanks for starting this discussion and for all the detailed responses from everyone. This community is incredibly helpful for navigating these complex financial decisions.

This is exactly what I needed to see! My partner and I are both attorneys making around $175k each, and we've been dreading the marriage penalty calculations. Reading through everyone's real-world examples has been incredibly helpful - especially seeing the actual dollar amounts people are facing. What's particularly interesting to me is how many specialized situations aren't covered by standard calculators. We both have partnership track positions that include profit-sharing bonuses that can vary wildly year to year (anywhere from $15k to $50k each), plus we're both paying back significant law school loans. The student loan interest deduction phase-out that several people mentioned is going to hit us hard - we're definitely going to lose most of that $5,000 combined benefit once we're married. Combined with what sounds like a substantial penalty on our base salaries, I'm starting to think we might need to seriously consider the December vs January wedding timing strategy. Brady, I'd love to beta test your simulator if you're still looking for users with complex scenarios. Our situation with variable partnership bonuses and professional school debt might help identify some edge cases. The legal profession has some unique compensation structures that would be great to stress-test against. Thanks for creating this tool and starting such an informative discussion. This thread alone has probably saved me hours of research and given me a much better framework for planning our wedding timeline!

Yes, unfortunately that's exactly right - this is one of the most frustrating aspects of gambling taxation. Even if you're a net loser for the year, you still have to report all your winnings as income on your tax return. In your example, you'd report the $2,000 in winnings as "Other Income" on Schedule 1. Your $3,000 in losses can only be deducted if you itemize deductions on Schedule A, and even then only up to the amount of your winnings (so $2,000 max). If your total itemized deductions don't exceed the standard deduction ($13,850 for single filers in 2023), you're better off taking the standard deduction and can't claim the gambling losses at all. This means you could end up paying taxes on $2,000 of "income" even though you actually lost $1,000 overall. It's a terrible system for recreational gamblers, but that's how the tax code is written. This is why it's so important to keep detailed records and understand the tax implications before you start gambling regularly.

Setting up an LLC for gambling activities generally won't help you avoid these tax issues and could actually make things more complicated. The IRS treats gambling as a personal activity, not a business, for most recreational bettors. Even with an LLC, your gambling winnings would likely still be treated as personal income subject to the same rules. To qualify as a gambling "business" that could use normal business accounting (where net losses could offset other income), you'd need to meet very strict criteria: gambling must be your primary occupation, you'd need to show profit motive, maintain detailed business records, and demonstrate expertise in the field. The IRS is extremely skeptical of these claims and most recreational bettors wouldn't qualify. The reality is that the tax code is deliberately unfavorable to gambling because Congress wants to discourage it. Your best bet as a recreational gambler is to either: 1. Keep your gambling small enough that you can absorb the tax hit on gross winnings 2. Make sure you have enough other itemizable deductions to exceed the standard deduction 3. Track everything meticulously so you can at least minimize the tax impact through proper reporting The tax complexity is definitely a legitimate reason to think twice about getting heavily involved in sports betting.

Has anyone dealt with clients who opted in to PTE tax mid-year? My client made the election in October 2024 for the 2024 tax year, but we had already been making quarterly distributions based on prior treatment. Trying to figure out how to retroactively adjust those distributions in the books vs. tax treatment.

This is exactly the type of complex book-tax difference that trips up even experienced practitioners! I've been dealing with similar PTE tax issues across multiple states this season. One thing I'd add to the excellent advice already given - make sure you're documenting the treatment clearly in your workpapers. I create a separate schedule that shows the flow: 1) Book treatment (distribution), 2) Tax treatment (deduction), 3) M-1 adjustment (add back), 4) M-2 offset (other addition to AAA). This helps during reviews and if you ever get questioned. Also, don't forget to consider the impact on each shareholder's basis calculations. The PTE tax deduction flows through and increases their basis, while the book distribution treatment doesn't affect basis at all. So you need to make sure the K-1 preparation reflects the tax treatment, not the book treatment, for basis purposes. For states like California and New York that have different timing rules for the PTE tax election, this gets even more complicated. Each state may require slightly different book-tax reconciliation approaches.