I've been using this exact structure (C-Corp + S-Corp) for 3 years now in my manufacturing business. Here's my experience: The key is making sure the consulting agreement is DETAILED and the S-Corp is providing real, documentable services. I have my S-Corp handle all executive management, marketing strategy, financial oversight, and business development. We keep detailed logs of hours, projects, and deliverables. The IRS did question this in a correspondence audit last year. What saved me was having: 1) A third-party compensation study showing my consulting rates were reasonable 2) Detailed work documentation and deliverables 3) Separate physical locations, email systems, and business operations Also important: Don't have the EXACT same ownership percentages in both entities. Mine are slightly different (I have a minority partner in the C-Corp but not the S-Corp).

Has anyone considered the state tax implications of this setup? I did something similar and while it worked fine for federal, my state (CA) has additional rules about related entities that nearly negated all the benefits.

Have you considered taking a 401k loan instead of a withdrawal? Most 401k plans allow you to borrow up to 50% of your vested balance (max $50,000) without any tax consequences as long as you repay it according to the terms. You'd be paying interest to yourself, and there's no credit check since you're essentially borrowing your own money. The downside is you'd need to repay the loan within 5 years in most cases, and if you leave your job before repaying it, the outstanding balance typically becomes due within 60-90 days or it's treated as a distribution (with taxes and penalties). I took a 401k loan last year rather than an early withdrawal and it saved me thousands in taxes and penalties. Just something to consider before permanently removing money from your retirement savings.

Just wanted to point out a less-known option - check if your 401k plan allows for hardship withdrawals. These still have taxes on earnings and potentially the 10% penalty, but they're available for specific circumstances like preventing eviction/foreclosure, certain medical expenses, college tuition, or home purchase. The advantage is that hardship withdrawals don't require repayment like loans do. Some plans also allow for withdrawals at age 55 without penalty if you separate from service - something to consider if you're closer to that age than 59½.

Something to be aware of with the Saver's Credit - the income limits are pretty low compared to other tax benefits. I qualified when I was early in my career, but got a raise and suddenly wasn't eligible anymore even though I wasn't making that much. For married filing jointly, you need AGI under $76,500 (for 2024 filing in 2025), which sounds like a lot but can be hit quickly with two moderate incomes. And the credit percentage drops as your income rises - only those with very low incomes get the full 50% rate.

I had this exact same issue with multiple tax softwares giving conflicting info about the Saver's Credit! Found out later that some tax programs have outdated descriptions that date back to when the credit was first introduced as the "IRA Tax Credit" in early 2000s. The Saver's Credit was expanded years ago to include 401(k)s, 403(b)s, 457 plans, and even the federal Thrift Savings Plan (TSP). So yes, your 401(k) contributions absolutely count!

One tip I haven't seen mentioned yet - make sure you're looking at the right tax year on your 1098-T! My university operates on a fiscal year that doesn't match the calendar year, and they sometimes include spring payments from December on the next year's form. I almost missed claiming $4,300 in qualified expenses because I didn't realize my December payment for spring semester was actually eligible for the current tax year. Check Box 7 on your form - if it's checked, it means some amounts reported might be for the next semester.

Has anyone used the IRS Free File options for handling education credits with 1098-T forms? I'm wondering if they're as good as the paid options for education credits.

Something to keep in mind with amended returns - make sure you're tracking your refund the right way. The regular "Where's My Refund" tool doesn't work for amendments. You need to use the "Where's My Amended Return" tool specifically. Also, if you filed your original return with direct deposit, don't assume your amended return refund will come the same way. They often send amended refunds as paper checks even if you previously got direct deposit. Learned this the hard way last year when I kept checking my bank account while the check sat in my mailbox for a week!

One tip I learned from my accountant - if you e-file your amendment, you can check the status online after about 3 weeks. But if you mail a paper amendment, you should wait at least 16 weeks before even trying to check the status. I mailed my amended return for 2022 last year (for a similar mortgage interest issue) and tried checking after 8 weeks - the system couldn't find any record of it. Nearly had a heart attack thinking it was lost! Called the IRS in a panic only to be told paper amendments don't even get entered into their electronic system until they're assigned to a processor, which can take 12+ weeks.