I've been through this exact situation with my own S-corp and can confirm what others have said - the distributions themselves are NOT additional income for financial aid purposes as long as they don't exceed your basis. The key thing to remember is that S-corp income is "pass-through" taxation. This means you're taxed on your share of the profits whether you take distributions or not. So when you see that S-corp income on Schedule 1 line 5 of your 1040, that's already your taxable income from the business. The Box 16 code D distributions are just you moving money from the business account to your personal account - it's accessing money you've already been taxed on, not generating new income. Think of it like transferring money between your checking and savings accounts. For your financial aid appeal, you should only report the S-corp income that flows through to your 1040 (which you mentioned shows up on Schedule 1). Don't double-count by also adding the distributions as "other income." Just make sure your distributions don't exceed your basis in the S-corp, which you can track using the basis information on your K-1s from previous years. As long as you stay within your basis, you're good to go!

I'm a tax professional who works with a lot of S-corp owners, and I want to emphasize something important that hasn't been fully addressed yet - make sure you're keeping detailed records of your basis calculations for future reference. While everyone is correctly explaining that distributions within basis aren't additional income, financial aid offices (especially for private colleges) sometimes ask for multi-year documentation during verification processes. I recommend keeping a running basis schedule that shows: 1. Your beginning basis each year 2. Your share of S-corp profits/losses (increases/decreases basis) 3. Any distributions taken (decreases basis) 4. Your ending basis This becomes especially important if you have multiple years of distributions or if your S-corp has both profitable and loss years. Having this documentation ready can save you a lot of headaches if the financial aid office requests additional details about your business income and distributions. Also, be aware that some CSS Profile schools may ask about the fair market value of your S-corp ownership as a business asset, which is separate from the income question but can still affect aid eligibility.

Anyone know if salary calculation works differently for the first few paychecks? When I started my job last year, my first 3 checks were lower than expected, then it evened out. HR said something about "annualized withholding" but never really explained it.

This is exactly why I always recommend new employees check their first few paychecks carefully! Your girlfriend's situation is pretty typical. A few things that might explain the $43.97 difference: 1. **State taxes** - You didn't mention which state she's in, but most states have income tax that would reduce her take-home pay further. 2. **Payroll timing** - If she started mid-pay period, her first check might be prorated differently than your calculation assumes. 3. **Additional deductions** - Things like disability insurance, life insurance, or union dues that might not be obvious. 4. **Withholding method** - Employers sometimes use more conservative withholding calculations, especially for new hires, which would result in larger refunds at tax time. The good news is that if it's just over-withholding, she'll get that money back when she files her taxes. I'd suggest she check her paystub breakdown carefully and maybe ask HR about any deductions she wasn't expecting. Most payroll departments are happy to explain the calculations if you ask nicely!

This thread has been incredibly helpful! As someone new to dealing with passive losses, I was making the same mistake as the original poster - looking at the 1040 and wondering why the form seemed to allow offsetting when the tax rules said it shouldn't. The explanation about Form 8582 acting as a "gatekeeper" before amounts even reach Schedule 1 finally made it click for me. I've been staring at my tax software wondering why my rental property losses weren't reducing my W-2 income, and now I understand it's actually working correctly by applying the limitations upstream. One thing I'm curious about - for someone just starting out with rental properties, is there a good rule of thumb for estimating how much in passive losses you might be able to use each year? I'm trying to plan ahead for next year's taxes and figure out if I should expect most of my depreciation and other deductions to get suspended.

This discussion really highlights how the tax code creates these seemingly contradictory situations! I've been teaching tax prep courses for volunteers, and this passive loss limitation concept is always one of the hardest things for new preparers to grasp. What I tell my students is to think of it like airport security - just because you bought a plane ticket doesn't mean you automatically get on the plane. Your passive losses might have a "ticket" to Schedule 1, but they have to pass through the Form 8582 "security checkpoint" first. Only the losses that clear security actually make it onto the form. The real challenge comes when you're using tax software that automates all this. The software correctly applies the limitations, but it doesn't always show you WHY certain losses didn't make it through. That's why manually working through Form 8582 at least once (even if you use software) can be incredibly educational for understanding how the limitation actually works. For anyone dealing with multiple rental properties or other passive activities, I'd also recommend keeping a simple spreadsheet tracking your suspended losses by activity. It makes tax planning much easier when you can see at a glance what you've got "banked" for future use or property sales.

Just a quick tip - make sure to use the most recent version of the W-8BEN form! Apple might not update their documentation, but the IRS updates these forms. I submitted with an outdated version and had to redo everything.

Just wanted to add another perspective as someone who went through this process last year. The W-8BEN form can definitely be intimidating at first, but it's actually quite straightforward once you understand what each section is asking for. One thing that helped me was keeping in mind that this form is basically just telling Apple (and by extension, the IRS) that you're an Australian resident who should benefit from the tax treaty between Australia and the US. This means instead of the default 30% withholding tax, you'll only have 15% withheld from your app sales revenue. A few additional tips from my experience: - Make sure your name on the form matches exactly how it appears on your Australian tax records - For Part II (claim of tax treaty benefits), you'll typically want to specify "Royalties" as the type of income since app sales are generally classified as royalty income - Keep a copy of your completed form for your own records - you'll need to reference it when filing your Australian tax return The good news is that once you get this sorted with Apple, you shouldn't need to resubmit unless your circumstances change significantly. Best of luck with your app launch!

Friendly reminder that if you're claiming these credits for 2023 or planning to amend previous returns, make sure you're using the correct version of Form 7202 for the specific tax year. The IRS updated this form several times as the programs changed and extended. Also, double-check if your state offers any additional credits or benefits for self-employed people affected by COVID. Some states implemented their own programs that you might also qualify for on top of the federal credits!

Adding to all this great advice - one thing that really helped me was keeping a simple calendar or log of the days I couldn't work due to COVID-related issues. I marked down sick days when I had symptoms, quarantine periods, and all the days I had to stay home with my kids when their school/daycare was closed. This documentation made filling out Form 7202 much easier because I had exact dates and could clearly separate the sick leave days from the family leave days. The IRS wants you to be able to substantiate the periods you're claiming, so having that timeline ready is super helpful. Also, don't forget that you can claim these credits even if you didn't have any federal income tax liability that year - they're fully refundable, so you'll get the money as a refund check. This was huge for me since my income was way down in 2020-2021 due to all the canceled gigs.