Quick question for anyone who's been through this - we're currently a partnership LLC making about $300k per year (split three ways). If we switch to S-Corp status, does each member have to take the same salary? Or can we customize based on how much each person actually works in the business?

Based on your $175K total income split three ways (~$58K each), you're right at the threshold where S-Corp election might start making sense, but it's borderline. Here's a simple way to think about it: **Partnership (current status):** - Each partner pays self-employment tax (15.3%) on their full $58K share = ~$8,874 per person in SE taxes - Simple tax filing, minimal compliance costs **S-Corp election:** - Each of you would need a "reasonable salary" (probably $35-40K given your roles) - SE taxes only on salary portion, not on remaining distributions - Potential savings: ~$3,000-4,000 per person annually - BUT: Additional costs for payroll processing, more complex tax returns, corporate compliance **My recommendation:** Stay as partnership for now. Your potential tax savings would likely be eaten up by the additional compliance costs and complexity. Once you're consistently over $250-300K total (so each partner is taking home $80K+), then revisit the S-Corp election. The beauty is you can always change later when the numbers make more sense. Focus on growing the business first!

If this passes, would this show up differently on our W-2 forms? Would there be a separate box for "overtime pay" that wouldn't be included in the federal taxable wages box?

One thing I haven't seen mentioned yet is how this would interact with retirement plan contributions. If overtime pay becomes federally tax-exempt, would that affect 401(k) contribution limits or calculations? For example, if I normally contribute a percentage of my gross pay to my 401(k), and now part of my income (overtime) isn't subject to federal tax, does that change how much I can contribute? Or would the contribution still be based on total wages including the tax-exempt overtime? This could be significant for people who work a lot of overtime and are trying to maximize their retirement savings. The interaction between tax-exempt income and retirement plan rules seems like it could get pretty complex.

Colorado DOR implemented enhanced fraud detection algorithms for TY2023 returns that are causing systematic delays across the board. Their internal processing queue prioritizes certain return types based on complexity factors and verification requirements. I've observed that returns with Schedule E income or non-W2 earnings are experiencing the longest delays, while simple returns with only W-2 income are moving through faster. If your AGI exceeds certain thresholds or you've claimed specific deductions like business expenses, expect additional verification steps. The system is functioning as designed, just with significantly reduced efficiency compared to previous filing seasons.

As a new Colorado resident (moved here last year), I'm experiencing this exact same issue! Filed my federal and Colorado returns on the same day in mid-February - federal was processed in 8 days, but Colorado is still showing "processing" after 6 weeks. This is so frustrating because I budgeted for receiving both refunds around the same time based on what friends told me about typical processing times. It's reassuring to know this is a widespread issue and not something specific to my return, but the lack of transparency from Colorado DOR is really disappointing. Other states seem to provide much better communication about delays and expected timelines. Has anyone found any official statements from the state about when they expect to catch up on the backlog?

Has anyone successfully gotten the penalties removed in a CP23 situation? I had a similar issue last year and got the payments sorted out, but they wouldn't remove the failure-to-pay penalty even though it was their mistake.

I went through this exact same CP23 nightmare two years ago! The IRS somehow "lost" three of my quarterly estimated payments despite having valid EFTPS confirmation numbers. What saved me was being extremely persistent and documenting everything. Here's what worked: I sent a certified letter to the IRS address on the CP23 notice with copies of ALL my EFTPS confirmations, bank statements showing the withdrawals, and a detailed timeline of when each payment was made. I also included a formal request for penalty and interest abatement citing "reasonable cause" since the error was entirely on their end. The key is to be very specific about the dates, amounts, and confirmation numbers. Don't just say "I made payments" - give them every single detail they need to trace the payments in their system. It took about 8 weeks, but they eventually found all my payments and reversed everything including penalties and interest. Also, if you have to call again, ask to speak with a "payment tracer specialist" - they have more authority to research misapplied payments than regular customer service reps. Good luck, and don't give up! You're definitely not at fault here.

Don't forget to check if she needs to pay state income tax in the state where she's working! Federal exempt status doesn't automatically mean state exempt. Some states have much lower thresholds for taxation.

Great question! I went through this exact situation with my college-age son last year. The key thing to remember is that being claimed as a dependent doesn't automatically disqualify your daughter from claiming exempt status on her W-4 - it just changes how her standard deduction is calculated. As others have mentioned, for dependents in 2025, the standard deduction is the greater of $1,250 or earned income plus $400 (but capped at the regular standard deduction of $14,600). With her expected $6,700 in earnings, her standard deduction would be $7,100. One additional tip: make sure she keeps good records of her actual earnings throughout the summer. If she ends up making significantly more than expected and goes over that $7,100 threshold, she might owe some tax even though she claimed exempt. In that case, she'd need to make quarterly estimated payments or face potential penalties. Also, don't forget about FICA taxes (Social Security and Medicare) - those will still be withheld from her paychecks regardless of her exempt status, since exempt only applies to federal income tax withholding.