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Don't forget you also need to pay yourself a reasonable salary as an S-corp owner!!! The IRS watches this closely. You can't just take all distributions and no salary to avoid payroll taxes. My friend tried that and got audited.
Whats considered "reasonable" though? Is there a percentage or formula the IRS uses?
The IRS doesn't have a specific percentage, but they expect you to pay yourself what you'd pay someone else to do your job. Generally, it should be based on market rates for your industry and role. For photography, you'd look at what other photographers in your area make as employees. A common rule of thumb is around 60% salary, 40% distributions, but it really depends on your specific situation. The IRS looks at factors like your time commitment, responsibilities, and what similar businesses pay. I'd suggest researching salary data for photographers in your area on sites like Glassdoor or PayScale to establish a defensible reasonable salary amount.
Just went through this exact situation with my consulting LLC that elected S-corp status! After all the confusion, here's what I learned: You definitely need Form 1040-ES for your personal estimated tax payments. Since you're a single-member LLC with S-corp election, the business profits flow through to your personal return, so you make estimated payments as an individual. The 1120-W would only apply if your S-corporation itself owed taxes (like built-in gains tax), which is rare for small businesses like ours. One thing that helped me was calculating my estimated payments based on last year's tax liability using the safe harbor rule - if you pay 100% of last year's taxes (or 110% if your AGI was over $150K), you won't face penalties even if you owe more this year. Also make sure you're withholding enough from your S-corp salary for payroll taxes. The estimated payments with 1040-ES should cover the income tax on your distributions, but your salary withholding needs to handle that portion separately. Hope this helps while you wait for your accountant to return!
This is really helpful! I'm new to the whole S-corp election thing and honestly feeling pretty overwhelmed by all the different forms and requirements. The safe harbor rule you mentioned sounds like a smart approach - I definitely don't want to deal with penalties on top of everything else. Quick question - when you say "withholding enough from your S-corp salary," how do you figure out the right amount? Is it just like setting up a regular W-4, or are there special considerations since you're essentially your own employee? I want to make sure I'm not setting myself up for a big tax bill at the end of the year.
dont forget to check if you got all your stimulus money from last year. if you missed any you can claim it on your taxes
With your income and 3 dependents, you're looking at a solid refund! The EITC alone could be around $7,430 as mentioned, plus you'll likely get $6,000 in Child Tax Credits ($2,000 per kid). So potentially $13k+ total refund depending on your withholdings. For tax prep, I've had good luck with Credit Karma Tax (now Cash App Taxes) - completely free for federal AND state. Just make sure you have all the documentation ready like SSNs, school records, etc. Good luck! π
Has anyone else noticed that the FAFSA instructions seem deliberately confusing? Why can't they just say "enter your total tax from line X of your transcript" instead of referencing the 1040 form only? Not everyone has their original forms, especially if they file electronically!
I think it's because the FAFSA form is designed by the Department of Education, while tax transcripts are an IRS thing. The two departments probably don't coordinate their documentation. It's super annoying, but I've found that calling your school's financial aid office can sometimes help - they deal with this confusion all the time.
I went through this exact same nightmare last year! What really helped me was understanding that tax transcripts use slightly different terminology than the actual 1040 form. Here's what I found on my transcript: - Line 22 (Total Tax) appears as "Tax Per Return" or sometimes "Total Tax" in the transcript - Schedule 2, Line 2 might show up as specific entries like "Self-Employment Tax" or "Additional Tax" One thing that saved me time: if you don't see any Schedule 2 entries on your transcript, that likely means you had $0 for that line, so you'd just use your "Tax Per Return" amount as-is for the FAFSA calculation. Also, double-check that you're looking at the right tax year transcript - I accidentally was staring at 2022 when I needed 2023 data! The financial aid office at my school was eventually helpful once they reopened after the weekend, so don't give up on reaching out to them either.
Don't forget that when you have two jobs, neither employer knows about the other one when calculating your withholding! That's usually why people with multiple jobs end up owing - the withholding tables assume each job is your only income.
Just to add to what others have said - yes, you absolutely need to report ALL income, including that $6.5k from your second job. The IRS gets copies of your W-2s/1099s so they'll know about it anyway. One thing I'd suggest is using the IRS Tax Withholding Estimator right now (it's free on their website) to see if you need to adjust your W-4s for the rest of the year. Since you owed last year at $78k and now you're making $88.5k total, you'll definitely want to increase your withholding to avoid a bigger surprise come tax time. For the dependent situation with your mom - make sure she meets all the requirements (income under $4,700 for 2024, you provide more than half her support, etc.). If she qualifies, that should help reduce your tax liability. As for tax prep, if TurboTax has worked well for you in the past and your situation isn't too complex, there's no shame in sticking with it. Your situation (two W-2s + dependent) is pretty straightforward for most tax software to handle correctly.
Carmen Ruiz
I'm going through the exact same thing right now! Got my 60-day letter back in December and here we are in February with still no movement. It's so frustrating especially when you're counting on that money. I've been checking my transcript weekly but it just shows the same review status. Really hoping we all get some good news soon π€
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Jasmine Quinn
β’Same here! December letter and nothing yet. I keep telling myself "any day now" but starting to lose hope. At least we're not alone in this mess π Have you tried calling them or just waiting it out?
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Mei Lin
I'm in a similar situation - got my 60 day letter back in late December and still waiting. What's really helped me is setting up text alerts through the IRS2Go app so I get notified immediately if there are any updates to my refund status. Also been checking my account transcript every Friday just to see if anything changes. It's definitely nerve-wracking when you're depending on that money, but from what I've read here and other places, most people do eventually get their refunds, it just takes way longer than the initial 60 days they quote. Hang in there! πͺ
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