Something nobody mentioned yet - make sure your accounting software is set up correctly to track your S-corp transactions properly! I messed this up my first year and had a nightmare fixing it at tax time. For QuickBooks, you should have your S-corp set up as a separate company file, not just running everything through your personal books. And make sure you're tracking your salary payments as actual payroll with proper withholding, not just as owner draws. This makes a huge difference when it's time to prepare your 1120-S and K-1.

I went through this exact same confusion when I first elected S-corp status for my single-member LLC! Yes, you absolutely need the K-1 - it's how your business income gets reported on your personal return. Here's what I wish someone had told me upfront: even though you're the sole owner, the S-corp election creates a separate tax entity. Your business files Form 1120-S, which generates a Schedule K-1 that shows your share of business income, deductions, and credits. You then take that K-1 and use it when filing your personal Form 1040. Given your numbers ($145K revenue, $72K salary, $43K distributions), it sounds like you have the salary vs. distribution split in a reasonable range, which is good. The IRS does scrutinize S-corps to ensure owner-employees are paying themselves reasonable compensation. For software, TurboTax Home & Business can handle entering K-1 information on your personal return, but you'll need business tax software (like TurboTax Business or similar) to actually prepare the 1120-S that generates your K-1. Many people in your situation find it worth paying a professional for the business return and then doing their personal return themselves. Don't skip the K-1 - it's required and the IRS will definitely notice if your personal return doesn't match what your S-corp is reporting!

Definitely don't add it to next year's taxes! Each tax year is separate, and putting income from 2024 on your 2025 return would technically be incorrect for both years. Just wait for the IRS notice. And FWIW I work at a bank - we're required to issue 1099-INTs for any interest of $10 or more, but we're also supposed to send paper copies unless you specifically opted for electronic statements only. Worth checking your bank settings for next year!

Don't stress too much about this! As others have mentioned, the IRS will likely catch this automatically through their matching system since banks report all 1099-INTs directly to them. For such a small amount ($43), you'll probably just get a notice in a few months adjusting your tax liability. The actual tax impact is minimal - even if you're in a higher tax bracket, we're talking about maybe $10-15 in additional tax owed. The IRS generally doesn't impose penalties for small, honest oversights like this, especially when it's clear there was no intent to evade taxes. I'd recommend just waiting for their adjustment notice rather than filing an amended return. The cost and hassle of amending isn't worth it for this amount. Keep good records of this situation in case you need to reference it later, and maybe set a reminder to double-check all your online banking portals before filing next year!

Has anyone used any of the mainstream tax software solutions like Avalara or TaxJar for handling the VDA process? We're trying to decide if we should go with specialized help or if the regular tax software companies have good VDA support.

This is exactly the situation my small manufacturing company went through last year. We had similar issues with high-value products pushing us over nexus thresholds in multiple states despite relatively low transaction volumes. One thing that really helped us was creating a comprehensive spreadsheet documenting every customer interaction regarding exemption certificates. We included dates of requests, methods of contact (email, phone, certified mail), and their responses (or lack thereof). This documentation became crucial during our VDA negotiations. For customers who were clearly resellers but wouldn't provide certificates, we gathered alternative evidence: their business licenses from state databases, screenshots of their websites showing they resell products, and invoices showing consistent business purchasing patterns over multiple years. Several states accepted this as reasonable evidence of exempt transactions. The key insight we learned was that state tax authorities are generally reasonable during VDA processes if you can demonstrate good faith effort and provide logical explanations for why sales were exempt. They understand that businesses sometimes have uncooperative customers. I'd recommend prioritizing your VDA filings by states with the highest potential liability first, and don't let perfect documentation prevent you from moving forward. The penalty relief from VDAs is significant, but only if you act before they contact you.

Just joining this community and wow, this thread is exactly what I needed to find! I received my CP12 notice yesterday showing a $2,100 reduction and I was honestly panicking about how to handle it. Reading through everyone's experiences has been incredibly helpful - it sounds like the phone route is basically impossible right now, but there are definitely other options. I'm particularly interested in the written response approach that several people mentioned having success with. A few questions for those who've been through this: 1. When sending the certified mail response, do you send it to the address printed on the CP12 notice itself, or is there a different address for disputes? 2. For the online IRS account transcript - does it show the specific reason for the adjustment, or just that an adjustment was made? My notice just says "math error" but doesn't explain which line or calculation they changed. 3. Has anyone tried the Taxpayer Advocate Service route? I'm wondering if this situation might qualify since it's causing financial hardship (I was counting on that refund for some urgent expenses). Thanks to everyone for sharing your experiences - this community is a lifesaver when dealing with IRS issues! I'll definitely update with my results once I try some of these approaches.

New to this community and currently dealing with my first CP12 notice - what a welcome to tax season! Got mine last week with a $950 reduction and after reading through this entire thread, I'm both relieved and overwhelmed. Relieved because clearly I'm not alone in this struggle (the automated "high call volume" rejection is apparently universal), but overwhelmed by all the different approaches people are suggesting. Based on everyone's experiences here, I'm leaning toward the written response route since multiple people have had success with it (@Molly Chambers @Salim Nasir). But I have one specific question that I haven't seen addressed: If you send a written response and they don't agree with your position, do they at least send back a detailed explanation of their reasoning? Or do you just get another generic notice saying "adjustment stands"? I'm trying to decide if it's worth the effort to dispute, or if I should just accept their math and move on. My notice claims there was an error with my Earned Income Credit calculation, but I triple-checked my work and I'm confident it's correct. Also planning to set up that online IRS account that @Salim Nasir mentioned - having real-time status updates sounds like it would save a lot of anxiety during this process. Thanks to everyone for sharing their experiences! This thread is incredibly valuable for those of us navigating this mess.

The IRS will take your refund. This happens to everyone on a payment plan. Your refund will be applied to your debt automatically. No exceptions. This actually benefits you by reducing your balance faster and cutting down on penalties and interest. Your monthly payment amount stays the same. You'll receive a notice showing how they applied your refund. Don't count on getting any of that money back.

I went through this exact situation two years ago. The IRS will absolutely take your refund even with an active payment plan - it's automatic. Here's what happened in my case: I had a $4,200 balance from 2021 taxes with a $175/month payment plan. When I filed my 2022 return expecting a $1,600 refund, the IRS applied the entire amount to my outstanding balance. My monthly payment stayed at $175, but my payoff date moved up significantly. The good news is that applying your refund reduces the principal balance, which means less interest and penalties over time. You'll get a CP49 notice showing exactly how they applied your refund. While it's disappointing not to get cash in hand, it's actually the most cost-effective outcome for your overall tax situation.