31% isn't actually that bad for California tbh. When I was making around 60k in LA, my withholding was closer to 35%! California's state income tax is no joke. One thing to consider is that there's actually a difference between your withholding rate and your effective tax rate. The withholding is what comes out of each paycheck, but your effective rate is what you actually pay after deductions, credits, etc. For example, my withholding was 35%, but after filing my taxes, my effective rate was only about 25% because I got a big refund. Still sucked seeing those small paychecks all year though.

Welcome to the high-tax club! I'm also a recent grad in California and went through the exact same shock. A few things that helped me understand what was happening: First, that 31% includes both your portion AND what feels like every tax California can think of. You've got federal income tax (probably around 12% at your salary), California state income tax (6-9% depending on your exact income), Social Security (6.2%), Medicare (1.45%), and that SDI (State Disability Insurance) at about 1.1%. The good news is you'll likely get some of this back when you file taxes, especially if you have student loan interest, contributed to a 401k, or qualify for other deductions. I got back about $2,800 my first year. Also check if your employer offers pre-tax benefits like health insurance, HSA, or 401k contributions - these reduce your taxable income and can lower your withholding. Even contributing just 3% to a 401k would save you money on taxes while building retirement savings. It sucks seeing such small paychecks, but you're not alone! California is expensive but the career opportunities often make up for it in the long run.

Has anyone considered the F reorganization approach? IRC Section 368(a)(1)(F) provides for a "mere change in identity, form, or place of organization of one corporation, however effected." You could potentially form a new S corporation and have it acquire the C corporation in an F reorganization. This would effectively convert the C corporation to an S corporation while potentially providing more flexibility than a direct conversion.

One strategy worth exploring is a gradual distribution approach over several years rather than trying to access all the accumulated earnings at once. Since you're the sole shareholder, you have complete control over the timing. You could take reasonable salary payments (which are deductible to the corporation), combined with modest dividend distributions spread over multiple tax years to manage your overall tax bracket. This won't eliminate the double taxation on accumulated E&P, but it can significantly reduce the overall tax burden by keeping you in lower marginal tax brackets. Another consideration is whether the corporation has any business expenses or investments that could be made before distributions - things like equipment purchases, facility improvements, or even funding a corporate retirement plan. These legitimate business expenses reduce the accumulated E&P and give you more tax-efficient ways to benefit from the corporate assets. The key is that there's no magic bullet to completely avoid tax on C corp accumulated earnings - the tax code specifically prevents this. But with proper planning, you can minimize the total tax impact through timing and strategic use of corporate funds.

Another thing to consider - make sure that promissory note is VERY detailed. My sister loaned me money for my house and we had a simple note, but our tax guy said it wasn't enough. He said we needed: 1) Fixed repayment schedule 2) Consequences for late/missed payments 3) Security/collateral details 4) Actual interest rate (even if small) Without these, he said the IRS might consider it a gift rather than a loan regardless of our intentions. We had to create a much more formal document later which was a huge hassle.

Just wanted to share my experience as someone who went through this exact situation last year. I loaned my son $180K for his house purchase with what I thought was a proper promissory note, but I made the mistake of not including any interest rate. Come tax time, I got hit with the imputed interest rules everyone's mentioning here. The IRS calculated that I should have charged about 4.2% interest (the AFR rate at the time), which meant I had to report roughly $7,500 in phantom income I never actually received. My son couldn't even claim the interest deduction because he never actually paid any interest. The lesson learned: always include at least the minimum AFR interest rate in your family loan, even if it's just 2-3%. It saves both parties from tax complications and makes the loan look legitimate to the IRS. I wish I had known about these rules beforehand - would have saved me a lot of headaches and unexpected tax liability.

Can someone tell me if this Notice 2023-21 lookback extension also applies to business returns? I have a small LLC and filed a separate business return for 2019. Wondering if I can still amend that if needed.

This is really helpful information! I had no idea about this extension. I'm definitely going to go back and review my 2019 return - I remember being super stressed that year with a job change and probably rushed through it. Quick question though - when you file an amended return using Form 1040-X, do you need to include copies of all the supporting documents again, or just the new ones for the changes you're making? I don't want to mess this up and delay my refund even more. Also, does anyone know roughly how long amended returns are taking to process right now? I know regular returns were backed up for a while, wondering if amendments are facing similar delays.

its like watching paint dry except the paint might randomly disappear and reappear whenever it feels like it lmaooo

I've been tracking my own transcripts for the past few tax seasons and here's what I've noticed: while the IRS technically updates daily, there are definitely patterns. Most significant movements (like refund approvals, cycle codes changing) tend to happen overnight Wednesday-Thursday and Friday-Saturday. But smaller updates like processing acknowledgments can pop up any day. My advice? Check Thursday mornings and Saturday mornings for the big stuff, but don't stress about checking daily - you'll just drive yourself crazy like the rest of us have! 😅