Can you break down the math on how that worked for you? Like what was your total income and how much did you actually save? I'm trying to figure out if it's worth the extra hassle for my wedding photography business.

Sure thing! My business made about $120K last year. As an LLC, I would've paid self-employment tax on the full amount (minus the deduction for half of self-employment tax), so about $17,000 in SE tax. My QBI deduction would have been roughly $22,800. As an S corp, I took a salary of $75K and distributions of $45K. I paid about $11,475 in FICA taxes (the equivalent of self-employment tax when you're both employer and employee), and my QBI deduction was calculated on just the $45K, so about $9,000. So I paid about $5,525 less in FICA/SE tax, but my QBI deduction was $13,800 lower, which at my tax bracket (24%) meant about $3,300 more in income tax. So my net savings was about $2,225. Not as much as I'd hoped, but still worth it, and I expect to save more as my business grows.

Oh wow, I'm in California too and didn't know this! Does the LLC have the same $800 minimum tax?

Yes, LLCs in California also have the $800 minimum franchise tax, but they don't have the additional 1.5% tax on net income that S corps do. So if your business is profitable, the S corp can end up costing more in CA state taxes even though you might save on federal taxes. It's definitely something to factor into your analysis before making the switch. I wish I had known this before I elected S corp status!

@KaiEsmeralda I haven't tried taxr.ai with amended returns yet, but it handles prior year carryforwards pretty well from what I've seen. The system seems to recognize carryforward schedules and flags them appropriately for review. One thing I've noticed is that it's particularly strong with investment income and capital gains/losses - areas where manual data entry used to eat up tons of time. It correctly identifies wash sales, properly categorizes different types of dividends, and even handles some of the trickier partnership distributions. Where I still exercise extra caution is with anything involving foreign income or complex business transactions. The AI is good but I wouldn't trust it completely with FBAR requirements or Section 199A calculations without thorough review. For bread-and-butter individual returns though, it's been a real time saver. Thanks for mentioning Tax Bandits - I hadn't heard of their outsourcing division either. Always good to have more options to evaluate!

@Lucas Adams Great question about client communication! I ve'been solo for about 5 years now and documentation quality has definitely been a key factor in choosing services. From my experience, the traditional outsourcing services like SurePrep generally provide better formatted workpapers that are easier to present to clients. They re'designed with the understanding that CPAs need to explain their work. The AI tools are getting better at this though. When I ve'used taxr.ai, their output includes clear source document references and calculation trails that I can easily walk clients through. Not quite as polished as traditional services yet, but much better than the early AI tools I tried a couple years ago. One tip - regardless of which service you choose, I always create a simple one-page summary for complex returns showing key inputs, major deductions, and tax-saving strategies applied. Clients appreciate this even more than detailed workpapers, and it positions you as the strategic advisor rather than just the preparer. The outsourcing service handles the grunt work, but the client relationship and value-add is still all yours. Good luck with your transition! The freedom of solo practice is worth the initial learning curve.

Thanks for this. Do you think I'd need to hire a crypto tax specialist to help create that documentation, or would a DIY approach with detailed spreadsheets be sufficient?

A DIY approach with detailed spreadsheets is absolutely sufficient for most people. The key is consistency and documentation of your methodology. For someone with $160k in sales and fairly straightforward trading, specialized software or one of the AI tools mentioned earlier would likely be more cost-effective than hiring a specialist. A good crypto tax specialist will charge $200-500/hour, which adds up quickly. Save that option for if you receive an audit notice or have truly complex situations involving mining operations or large-scale DeFi yield farming.

Reporting a zero cost basis is technically compliant since you're paying the maximum possible tax, but you're likely overpaying by a lot. For small amounts maybe it's worth the simplicity, but for OP's situation with $160k in sales, that would mean paying taxes on the full amount instead of just the gains.

Exactly this. @Liam Sullivan, with smaller amounts it might make sense to just use zero basis for simplicity, but for someone like @Mateo Sanchez with $160k in sales, that could mean paying an extra $25-30k in taxes unnecessarily. Even if your records are incomplete, making a reasonable estimate based on what you can piece together is much better than assuming zero cost basis. The IRS wants to see good faith effort, not perfect records.

9 Unfortunately, there isn't a public database where you can look up EIN numbers. The IRS keeps that information confidential for privacy reasons. You could try checking with your state's licensing agency for daycares - sometimes they require the EIN as part of the licensing process and might be able to help.

16 Thanks for the info. I'll check with our state's childcare licensing division tomorrow. Didn't think about that angle!

1 Good point! I do have a Dependent Care FSA through work and used about $5000 through that. So I'd only claim the remaining $8500 on Form 2441, right?

Exactly right! You can only claim the Child and Dependent Care Credit on expenses that weren't reimbursed through your FSA. So if you used $5,000 from your Dependent Care FSA, you'd report that amount on Line 12 of Form 2441, and then claim the credit on the remaining $8,500. Just make sure to keep good records showing which expenses were paid through the FSA versus out-of-pocket, especially important in your case where the provider information is missing.

Isn't there also the issue of state taxes? Some states don't recognize S corp elections or tax them differently. OP didn't mention their state residency situation but as an expat that might matter too.