I've been through this exact scenario with my S Corp, and it's definitely stressful when you realize you're in negative equity territory. The advice about reclassifying part of your distributions as a loan is solid, but I want to emphasize how important the documentation is. When I did this, I created a formal promissory note that included: - The principal amount ($4K in your case) - Interest rate at the AFR for the month the original distribution occurred - Monthly payment schedule over 3 years - Personal guarantee (even though you're the owner) - Corporate resolution authorizing the loan The key thing is making sure this looks like a legitimate business transaction. I actually started making the monthly payments immediately after setting up the loan documentation, which helped demonstrate to my CPA (and potentially the IRS) that this was a real obligation, not just a paper transaction to avoid taxes. Also, don't forget that once you reclassify part of the distribution as a loan, you'll need to report the interest income on your personal return and the company can deduct the interest expense. It's a small additional complexity but worth mentioning. The good news is that this approach should reduce your excess distribution from about $8,825 down to around $4,825, which will save you some money on the capital gains treatment.

I went through a very similar situation with my S Corp two years ago and wanted to share what worked for me. The loan reclassification approach that others have mentioned is definitely your best bet at this point. Here's what I learned from my experience: when you're creating the loan documentation, make sure to use the AFR rate that was in effect during the month you actually took the distributions in 2023, not the current 2024 rate. This shows the IRS that you're applying the proper rate retroactively rather than just picking a convenient current rate. Also, I'd recommend being conservative with your repayment terms - I used a 5-year schedule even though I could have paid it back faster. This made the monthly payments more reasonable and looked less like I was trying to rush through a fake transaction. One thing that really helped me was getting a formal corporate resolution passed (even though I was the only shareholder) authorizing the company to accept the loan conversion. My attorney said this adds another layer of legitimacy to the transaction and shows proper corporate formalities were followed. The whole process ended up saving me about $2,800 in capital gains taxes on the excess distribution, so it was definitely worth the extra paperwork and documentation effort. Your $4K reclassification should provide similar tax savings while still leaving you with a manageable remaining excess distribution amount.

Hassan, I'm so sorry you're going through this ordeal. What you've described is textbook predatory behavior from these tax resolution mills - the vague updates, refusing documentation, blocking your accountant, and constantly asking for more money are all classic red flags. As a senior who's dealt with IRS issues myself, I want you to know that you have more power than they want you to believe. The fact that they won't communicate with your independent accountant is particularly telling - legitimate tax professionals welcome transparency and collaboration. Here's what worked for me when I was in a similar situation: **Immediate action items:** - Send that certified letter terminating services (as Victoria mentioned) - Request your Tax Account Transcript from IRS.gov - this will show you the truth about what's actually been filed - Document every interaction you've had with them moving forward **The reality check:** At $12,000+ with zero progress, you've likely already paid more than what most people owe in back taxes. These companies count on you feeling overwhelmed and dependent on them, but the IRS actually has reasonable payment options when you work with them directly. Don't let them make you feel like your situation is uniquely complex - it's their business model to keep you paying indefinitely. You deserve honest help, not empty promises. Stay strong, and please keep this community updated on your progress. We're rooting for you.

Hassan, I'm so sorry you're dealing with this nightmare. What you've described is unfortunately a textbook case of how predatory tax resolution companies operate - they prey on people's fear and desperation while providing little to no actual value. The most important thing to understand is that you have options and you're not trapped in this situation. These companies deliberately make you feel helpless and dependent on them, but the truth is that most tax issues can be resolved directly with the IRS or through legitimate local tax professionals at a fraction of what you've already paid. Here's my advice for immediate action: **Stop all payments immediately** - Don't give them another penny. They've had two years and $12,000+ to show results. **Demand your files back** - Send them a certified letter terminating their services and requesting all your documents. They are legally required to return everything. **Get the real picture of your situation** - Request your Tax Account Transcript from the IRS (free at IRS.gov). This will show you exactly what's been filed and what your actual tax situation is, without their spin. **File complaints** - Report them to your state attorney general, the Better Business Bureau, and the IRS using Form 14157. As a grandparent trying to do right by your family, you deserve so much better than this treatment. These companies count on good people like you feeling too overwhelmed to fight back, but you have more power than they want you to know. Please don't let them take advantage of you for one more day.

Something nobody has mentioned yet - you'll need to pay self-employment tax (Medicare + Social Security) on this income too, which is about 15.3% ON TOP OF regular income tax. It really adds up! If you think you'll make more than $1000 in self-employment income in 2025, you should probably make quarterly estimated tax payments to avoid underpayment penalties next year.

I went through the exact same situation last year! The key thing to remember is that the $600 threshold for 1099-K forms is just when PayPal is required to send YOU the form - but you're required to report ALL income regardless of whether you get a form or not. Here's what I did in TurboTax: Go to the "Federal Taxes" tab, then "Wages & Income," and look for "Self-Employment Income" or "Business Income." You'll create a simple business for your art commissions. For the income amount, just add up all your PayPal payments from your transaction history - PayPal keeps good records that you can download. The silver lining is that you can deduct business expenses like art supplies, software, and even a portion of your internet bill against this income. Keep all your receipts! Also, since you made around $1,400 total ($800 PayPal + $600 from the 1099), you'll owe self-employment tax on that, but it's not as scary as it sounds when you factor in the deductions. Don't stress too much - you're doing the right thing by reporting everything honestly!

Welcome to the "transcript anxiety club" that apparently every business owner joins during tax season! 😅 I'm fairly new to this community myself, but I've been following this discussion closely because I'm in almost the exact same boat - filed my Schedule C return about 2 weeks ago and have been fighting the urge to check my transcript every day. What really struck me from reading everyone's experiences is how this seems to be the norm rather than the exception for business returns. The explanation about multiple IRS databases not syncing in real-time actually makes so much sense, even though it's frustrating that we're left in the dark about where our returns actually are in the process. I think what's helping me the most is realizing that the acceptance email really is the key indicator that everything is moving forward properly. It's not just a "we received your paperwork" notification - it means the return passed all the initial validation checks and is actually in the system for processing. Thanks to everyone who shared their timelines and experiences. It's so much easier to wait it out when you know you're not alone in this process!

I'm brand new to this community but definitely not new to tax season stress! Just filed my first business return with Schedule C yesterday and I'm already feeling that familiar anxiety about what comes next. Reading through everyone's experiences here has been incredibly reassuring - it sounds like the "transcript showing nothing while you wait forever" experience is basically a rite of passage for business owners. I had no idea that business returns go through additional validation steps or that the IRS has multiple databases that don't sync up properly. That explains so much about why this process feels so mysterious from our end! The acceptance email insight is really helpful too. I've been treating it like just an automated "we got your paperwork" message, but knowing it actually means the return passed validation checks and is legitimately in the system makes me feel a lot more confident about the process. Thanks to everyone for sharing their timelines and experiences - it makes such a difference to know this waiting game is normal, even if it's nerve-wracking. Definitely going to try to follow the 21-day rule before I start obsessively checking my transcript (we'll see how that goes! 😅

I'm dealing with a very similar timeline to yours! Filed my original return in late January, saw the 570 code pop up in mid-February, and just got my amended return accepted about 10 days ago. Still waiting for the 971/977 codes to appear, but this thread has been incredibly educational about what to expect. What I find most helpful from reading everyone's experiences is that this seems to be a pretty standard process, even though it feels anything but standard when you're going through it for the first time. The codes look scary but they're really just the IRS's way of tracking progress through their system. I've been checking my transcript obsessively, but after reading @Freya Andersen's tip about Wednesday updates, I'm going to try to limit myself to once-weekly checks to preserve my sanity! 😅 For anyone else in this boat - it sounds like patience is really the only option here, but at least we know we're not alone in dealing with these long processing times. The 12-20 week timeline everyone's mentioning actually seems pretty consistent across different experiences. Thanks to everyone sharing their stories - it's making this whole process much less stressful knowing what's normal!

This thread has become an amazing resource! I'm currently in week 6 since my 977 code appeared, and reading everyone's experiences here has really helped manage my expectations about the timeline. One thing I wanted to add from my research: if you're checking your transcript and see a cycle code ending in "05" (like 20240505), that typically means your return is being processed in the current cycle. If it ends in "02" or "03", it might indicate additional review time needed. Also, I've found that calling the IRS early in the morning (right when they open at 7 AM) gives you the best chance of getting through without ridiculous hold times. The agents have been pretty helpful in confirming that my return is moving through normal processing channels. For those just starting this journey - the waiting is brutal, but everyone's timeline estimates here have been pretty accurate in my experience. The 971 notice really is just bureaucratic confirmation, nothing to stress about. Hang in there! 💪