As a tax professional, I want to emphasize something important that hasn't been fully addressed - the timing of when your boss can make the S-corp election for it to be effective this year. If he wants the S-corp status to apply to the entire 2025 tax year, he needs to file Form 2553 by March 15, 2025 (2 months and 15 days after the beginning of the tax year). If he files after that deadline, the election won't be effective until January 1, 2026. This is crucial because if he's already been taking "salary" payments in 2025 but the S-corp election isn't effective until 2026, ALL of those payments for 2025 will need to be treated as owner draws for tax purposes, regardless of how they were processed through payroll. Also, once he makes the S-corp election, he'll need to obtain an EIN if the PLLC doesn't already have one, set up proper payroll withholding, and start making quarterly payroll tax deposits. The "reasonable salary" requirement is real - the IRS has been cracking down on S-corp owners who try to minimize their salary to avoid payroll taxes. Given the complexity and potential penalties for getting this wrong, I'd strongly recommend having a qualified tax professional handle the transition, especially since he's already taken payments this year that need to be properly classified.

I've been following this discussion and want to add a practical perspective as someone who handles payroll for several small businesses. One thing that often gets overlooked is the quarterly payroll tax filing requirements once you make the S-corp election. As an S-corp, your boss will need to file Form 941 quarterly and make federal tax deposits (often monthly or semi-weekly depending on the payroll amount). This is in addition to state payroll tax requirements. Miss these deadlines and you're looking at penalties that can quickly eat into those self-employment tax savings everyone's talking about. Also, regarding the "reasonable salary" discussion - I've seen the IRS audit several S-corp owners in our area, and they seem to focus on businesses where the salary is less than 40-50% of the business profit. While there's no hard rule, that seems to be a red flag threshold. For a law practice with $150k profit, paying a $40-50k salary and taking the rest as distributions would probably be defensible, but paying $25k and taking $125k in distributions would likely attract unwanted attention. The paperwork burden is real - beyond just the tax return complexity, you're now dealing with W-2s, payroll tax returns, and proper documentation requirements. Make sure your boss factors in the time cost of all this additional compliance work when calculating whether the tax savings are worth it.

Had to do this last year after getting flagged for identity verification. Bring everything others mentioned but also consider bringing your W-2s or 1099s if you have them - they didn't ask for mine but the person next to me needed theirs. The staff was actually really helpful and walked me through what they needed. One tip: park at a nearby garage if you're in a city location because IRS building parking fills up fast, especially on Mondays and Fridays. Whole process took about 40 minutes and my refund showed up 6 business days later!

Just went through this process a couple weeks ago! In addition to what everyone mentioned, I'd recommend bringing a printed copy of your online account transcript if you have access to it - the IRS agent said it helped speed things up since they could see my filing history right there. Also, dress business casual if possible - I know it sounds silly but the security and staff seemed to take me more seriously vs the person before me in flip flops and a tank top. My appointment was at 10am and I was out by 10:35, refund hit my account exactly 8 days later. The whole thing was way less stressful than I built it up to be in my head!

22 Quick question - does anyone know if the threshold for 1099-K reporting is staying at $600 for 2025 filing, or is it going back up? I sell stuff on eBay occasionally and I'm trying to figure out if I need to worry about this for next year.

I've been dealing with a similar situation and wanted to share what I learned from my tax preparer. The reason most tax software pushes you toward Form 8949 instead of Schedule 1 line 24z is that line 24z is typically reserved for specific types of income adjustments that don't involve capital transactions. For personal items sold at a loss (like your furniture and electronics), the IRS considers these capital transactions, even though they're personal property. This means Form 8949 is technically the correct form, despite feeling overly complicated for what should be simple. One thing that helped me was realizing I could summarize similar items rather than listing every single transaction. For example, "Various household items sold on PayPal - 15 transactions" with total proceeds and estimated cost basis. As long as you can reasonably justify your basis estimates and keep any receipts or records you do have, this approach is acceptable and much more manageable than itemizing everything separately. The good news is that once you set it up correctly in the tax software, it automatically handles all the calculations and transfers the information to the right places on your return.

Has anyone tried the IRS Free File Fillable Forms for this? I know it's not as user-friendly as the guided software, but it should theoretically support all tax forms and codes including Schedule D with Code L on Form 8949, right?

I ran into this same issue last tax season! After trying several free options that didn't support Code L, I ended up using the IRS Free File Fillable Forms that Zoe mentioned. Yes, it's more manual work, but it's completely free and supports all codes. For anyone going this route: you'll need to calculate your own gains/losses and manually enter each transaction on Form 8949. Code L is for when basis wasn't reported to the IRS (which is typically the case with 1099-K from personal property sales). The key is documenting your original cost basis - even rough estimates are acceptable for personal items you sold at a loss. One tip: keep detailed records of how you determined your cost basis in case of questions later. I made a simple spreadsheet showing item descriptions, estimated original purchase dates/prices, and sale amounts. Made the whole process much smoother.

Don't make this harder than it needs to be! The food delivery apps should have sent you a 1099-NEC or 1099-K showing your income. Just report that on Schedule C. For the vehicles, if youre using standard mileage, you just track miles and multiply by the rate (65.5 cents per mile for 2023). no need to worry about all this complicated trade-in stuff unless your accountant says so!!!!

As someone who's dealt with business vehicle trades recently, I want to emphasize how crucial it is to get the depreciation recapture calculations right. When you trade in business vehicles, you need to account for any depreciation you've previously claimed (or deemed to have claimed with standard mileage). For your Honda Civic with 20% business use, you'll need to calculate the business portion of any gain/loss. Same with the Elantra at 85% business use. The key is determining your adjusted basis for each vehicle - original cost minus accumulated depreciation for the business portion. One thing that caught me off guard was that even with the standard mileage method, the IRS considers you to have taken depreciation based on the depreciation component built into the mileage rate. This affects your basis calculation when you dispose of the vehicle. I'd strongly recommend keeping detailed records of each vehicle's purchase price, trade-in value, business use percentage, and total business miles driven. You'll need all this information for proper reporting on your Schedule C and potentially Form 4562.