I'm 99% certain your accountant meant 100.00000% (with decimal places) and there was a miscommunication. S-corps often use multiple decimal places for precision with ownership percentages, especially with complex ownership structures. Ask your accountant if they meant 100% with several decimal places of precision, not 10,000,000%.

This is absolutely incorrect and you need to address this immediately before filing. Schedule K-1 allocation percentages represent your ownership stake and literally cannot exceed 100% - it's mathematically impossible. Even if you owned every single share of the company, you'd show 100%, not 10,000,000%. I suspect there's been a major miscommunication somewhere. Your 100,000,000 shares is just the number of shares you own, not a percentage. The percentage should be calculated as (your shares ÷ total outstanding shares) × 100. If you're the sole owner, that's 100%. If there are other shareholders, it would be some fraction of 100%. Please sit down with your accountant and ask them to walk through exactly how they calculated 10,000,000%. There's either a serious misunderstanding about what the form is asking for, or perhaps they meant something entirely different (like 100.000000% with decimal precision). Filing with 10,000,000% would almost certainly trigger an immediate audit flag since it's mathematically impossible. Don't sign anything until this gets cleared up properly.

Just be super careful about claiming 100% business use. The IRS scrutinizes this heavily, especially with vans that could potentially be used personally. Keep a detailed mileage log with the purpose of each trip. There's apps that can track this automatically. If you slip up and use it even once for personal purposes, you technically need to reduce your deduction by that percentage of personal use.

For a videographer using a Transit 100% for business, I'd lean toward purchasing if you plan to keep it long-term. Here's why: Transit cargo vans typically have a GVWR over 6,000 lbs, qualifying them as "heavy vehicles" with better depreciation rules. You can potentially deduct $30,200 in year one through Section 179, plus bonus depreciation on the remaining amount. The cash flow consideration is important though - leasing gives you lower monthly payments which might be better when you're building your client base. But if you have steady income and plan to keep the van 5+ years, the total tax savings from purchasing usually outweigh leasing. One practical tip: Get the exact GVWR specs for any Transit model you're considering. The base Transit-150 might be under 6,000 lbs, but the Transit-250/350 cargo vans are definitely over, which makes a huge difference for your deductions. Also factor in that cargo vans hold their value well in the current market, so you'll have equity if you buy versus nothing if you lease.

Tax preparer here (but not yours!) - one thing no one has mentioned yet is that you might want to look into filing amended returns BEFORE the IRS comes after you. If you voluntarily correct errors before being audited, it can sometimes reduce penalties. This does mean you'll need to figure out what's wrong with your returns though. Common issues with fraudulent preparers include fake Schedule C businesses, inflated charitable donations, and bogus education credits. The preparer was probably getting you larger refunds by making up these deductions.

I'm going through something very similar right now and wanted to share what I've learned so far. Got the same type of letter about my preparer being under investigation about 3 weeks ago. The first thing I did was immediately request my IRS account transcripts online (irs.gov/individuals/get-transcript) to see exactly what was filed under my SSN. What I found was shocking - there were business expenses totaling over $8,000 that I never discussed with the preparer, plus charitable donations I never made. I've already contacted the IRS agent mentioned in the letter and scheduled my interview. She was actually pretty helpful and explained that they're mainly trying to build a case against the preparer, not go after us individually (unless there's evidence we knowingly participated in fraud). My advice: Don't wait. Get your transcripts now, document any discrepancies between what was filed and your actual financial situation, and be proactive about contacting the IRS. The agent told me that cooperation and transparency usually work in your favor when it comes to penalty assessments. Also, keep records of any communications you had with this preparer - texts, emails, receipts for their services, etc. This can help show your good faith efforts and lack of knowledge about any fraudulent activity. The stress is real, but from what I've been told, most people in our situation end up having to pay back taxes and interest but avoid the worst penalties if they cooperate fully.

Has anyone experienced any audit issues by NOT filing the 1023-EZ? Like if you stay under $5k for a few years but then grow, does the IRS ever come back and question your earlier years?

I'm dealing with this exact situation right now! I'm forming a small educational nonprofit focused on financial literacy workshops in underserved communities. Expected annual budget is around $3,000, so we'd definitely fall under the $5,000 threshold. After reading through all these responses, it sounds like the consensus is pretty clear - even though we technically don't need to file 1023-EZ, the practical benefits far outweigh the $275 cost. The points about donor tax deductions, bank account requirements, and state-level exemptions are really compelling. One question I haven't seen addressed: if we file the 1023-EZ now while under $5k, does that help establish our credibility with potential funders? I'm wondering if having that determination letter from day one makes us look more legitimate when applying for small grants, even if the grants themselves don't explicitly require 501c3 status. Also, for those who used the document analysis services mentioned here - did they help with the actual 1023-EZ application process, or just with the formation documents like bylaws and articles of incorporation?

Has anyone successfully deducted the costs of medications for egg freezing? The hormones alone cost me almost $4,000 and I'm not sure if I need special documentation for those or if regular receipts are enough?

One thing to keep in mind that I don't see mentioned yet - if you're planning to use the frozen eggs in the future, you'll want to keep all your documentation from the freezing procedure for when you eventually do IVF or other fertility treatments. The IRS allows you to deduct the costs when you incur them, but having that paper trail will be important if you ever get audited. Also, make sure you're tracking mileage to and from all your appointments (monitoring visits, retrieval procedure, etc.). Medical travel is deductible at the standard mileage rate, and with all the monitoring required for egg freezing, those miles can really add up. I probably had 15+ appointments during my cycle and didn't think to track the mileage until it was too late. The consultation fees with the reproductive endocrinologist are also fully deductible, even if you decide not to proceed with the procedure after the consultation.