Has anyone actually been audited specifically for Q sub timing issues? I made a similar mistake last year (filed about 30 days late) and just went ahead with it without requesting relief. Nothing bad has happened yet, but now I'm getting nervous reading this thread.

Based on your timeline, you're definitely in a tricky spot with the Q sub election timing. Since your LLC was formed on March 25th, that's the earliest possible effective date you can use for Form 8869. The 2 months and 15 days deadline from that date would have been June 9th, so you're likely going to need to request late election relief. For the $15,000 in transactions that happened before March 25th (when the LLC didn't legally exist), those would typically be treated as personal business activities that you'll need to formally assign to the LLC through proper documentation once it was formed. This is separate from your Q sub election issue but equally important for clean record-keeping. I'd strongly recommend requesting late election relief under Rev. Proc. 2013-30 rather than choosing a current effective date. This will allow you to treat the LLC as a Q sub from March 25th forward, which is probably what you intended from the beginning. You'll need to include a reasonable cause statement explaining why you missed the deadline - something like "taxpayer was unaware of the filing deadline" is often accepted for first-time filers. Make sure to include all supporting documentation with your Form 8869, including your LLC formation documents and evidence of the business activities. The IRS is generally reasonable about granting relief for these situations, especially when there's clear business purpose and no tax avoidance motive.

For the crypto gambling specifically - I had a similar issue and learned the hard way that different platforms handle the tax reporting differently. Does your gambling platform send any tax forms? Some do provide documentation you can use.

Beth, I totally understand the stress you're feeling - tax situations with crypto gambling and unreported income can feel overwhelming. Here's what I'd focus on if I were in your shoes: First, yes, you do need to report crypto gambling activity, but as others mentioned, losses are only deductible up to your winnings amount. Keep detailed records of all your gambling transactions - deposits, withdrawals, wins, and losses. For your unreported cash income and the "Green Thumb Services" work, the IRS considers all income taxable regardless of how you received it. Even informal business income needs to be reported. Since you're self-employed, you'll likely need to file Schedule C for the lawn care business and pay self-employment taxes. My advice: consider filing amended returns for previous years where you didn't report income, and definitely get this year's filing correct. The voluntary disclosure approach mentioned by others really does result in lower penalties than if the IRS discovers unreported income on their own. Given the complexity of your situation with both crypto gambling and unreported business income, it might be worth consulting with a tax professional who has experience with these specific issues. The peace of mind alone could be worth it, and they can help you navigate the best way to get compliant while minimizing penalties. You're taking the right step by addressing this now rather than ignoring it. The IRS is much more lenient when taxpayers come forward voluntarily.

Has anyone here actually been audited for HSA withdrawals? What was that experience like? I'm in a similar boat with about $45k in my HSA and planning to use some for a down payment on a house.

I withdrew $25k from my HSA last year for qualified medical expenses and didn't have any issues. The key is really having solid documentation - I created a spreadsheet that listed each expense with the date, amount, provider, and what it was for, then matched each one to a receipt or EOB. One thing I learned is that you want to be extra careful about expenses that might be borderline. Things like over-the-counter medications are only qualified if prescribed by a doctor, and certain medical equipment needs to be primarily for medical care. I had a few massage therapy sessions that I wasn't 100% sure about, so I excluded those from my reimbursement just to be safe. The IRS cares way more about whether your expenses are actually qualified than the dollar amount you're withdrawing. As long as you have legitimate medical expenses and good records, you should be fine. Just make sure to keep everything organized in case you do get questioned later.

Just to add another data point - I'm on a J1 from Canada doing postdoc research, and my experience matches what others have said. I arrived in August 2023, and I was exempt from Social Security taxes in 2023 and 2024, but starting January 2025, they began withholding FICA taxes from my paycheck. My university provided a letter explaining this transition, stating that the exemption only applies for the first two calendar years regardless of when during those years you were present. The letter specifically referenced IRS Publication 519 and Section 3121(b)(19) of the Internal Revenue Code.

Has anyone here successfully claimed a refund for Social Security taxes that were incorrectly withheld during their first two years on a J1? My university withheld FICA taxes from my first paycheck in 2023 all the way through 2024, and I only recently learned I shouldn't have been paying these taxes during that time. I've heard you can file Form 843 "Claim for Refund and Request for Abatement" along with a statement from your employer, but I'm wondering if anyone has actually gone through this process successfully.

For the actual numbers - I have a service business in a different field (legal consulting) that's about your size. My CPA had me do a compensation study showing average salaries for people in our field. Based on my study, I pay myself $700k salary on about $3.5M net. My wife is officially our CFO with a $250k salary for 30 hours/week. We documented both with formal job descriptions, board minutes approving the compensation, and market research showing comparable positions. Haven't had any issues with IRS in 6 years.

With $3.9M net profit, your $500k salary is definitely on the low side and could trigger IRS scrutiny. Most tax professionals recommend 40-60% of net profit as wages for service-based S Corps where the owner is the primary value generator. A few key concerns with your situation: 1) **Salary ratio**: At ~13% of net profit, you're well below what the IRS typically expects for a consulting business. Consider bumping to at least $1.5-2M to be safer. 2) **Family client concentration**: 90% revenue from your cousin's company creates additional risk. The IRS might view this as disguised employment or income shifting between family members. Document everything - contracts, deliverables, market-rate justification. 3) **Wife's compensation**: $325k for 25 hours/week needs very strong justification. That's equivalent to a $650k full-time salary, which is a huge jump from her $40/hr independent rate. Consider something closer to $120-150k unless she has executive-level responsibilities that truly command those rates. The family connections will definitely draw extra attention if audited, so documentation is crucial. I'd recommend getting a formal compensation study done and having written job descriptions for both positions.