Quick tip for new S Corp owners: save 30-40% of ALL your profits in a separate account for taxes. Better to have too much saved than not enough! My first year with an S Corp I got KILLED with taxes because I didn't realize I needed to make estimated payments.

As someone who just went through this exact same confusion last year, here's what I wish someone had told me upfront: **For YOU personally:** Make quarterly estimated payments using Form 1040ES. You can pay online at irs.gov/payments. Set up an account and it's pretty straightforward once you find the "Make a Payment" section. **For the S Corp:** No quarterly income tax payments needed, but you DO need to handle payroll taxes if you're paying yourself a salary. Use EFTPS (Electronic Federal Tax Payment System) for employment tax deposits. **Estimating when you're new:** I used the "annualized income installment method" - basically, I calculated my tax liability based on actual income earned each quarter instead of trying to guess the whole year. Form 2210 has the worksheet for this. **Pro tip:** Open a separate business savings account and automatically transfer 35% of every deposit. This covers federal taxes, state taxes, and self-employment taxes on pass-through income. Adjust the percentage based on your tax bracket, but 35% kept me safe in my first year. The IRS has a pretty decent S Corp tax guide (Publication 589) that explains the pass-through taxation and salary requirements in plain English. Way better than trying to piece it together from random articles online!

Just went through this process last year. Make sure you're extremely thorough with Form 433-A (Collection Information Statement). The IRS will scrutinize every detail of your financial situation. Document ALL your medical expenses related to your disability because those can be counted as necessary living expenses. Also, consider checking if you qualify for Currently Not Collectible status as an alternative. With your situation (no assets, on disability), you might qualify. This doesn't eliminate the debt, but puts collections on hold. The IRS determined I was CNC last year and it bought me time while I improved my situation.

Andre, your situation is actually quite common and you definitely have options. Being on workers' comp while applying for an OIC isn't a barrier - in fact, it can strengthen your case since it demonstrates limited earning capacity. A few additional points to consider beyond what others have mentioned: 1) Make sure to include all your medical expenses related to your motorcycle accident as allowable living expenses on Form 433-A. This includes ongoing treatments, medications, physical therapy, etc. 2) Since you're in Washington State, you'll also want to address the state tax debt eventually, but focusing on federal first is smart since the IRS processes are generally more established. 3) Document your disability thoroughly - the IRS needs to understand this isn't a temporary situation where you'll be back to full earning capacity soon. 4) Consider whether you might qualify for "doubt as to collectibility" (you can't pay) versus "effective tax administration" (paying would create economic hardship). Given your circumstances, doubt as to collectibility seems most appropriate. The fact that you only made $12K in 2020 before your accident and are now on disability payments should work in your favor for demonstrating inability to pay. Just make sure every expense you claim is reasonable and well-documented.

Just to add one more consideration - make sure you're documenting this transition properly beyond just the tax forms. Since the departing partners are becoming tenants in common rather than partners, you should have: 1. An amendment to the partnership agreement documenting the withdrawal 2. A deed transferring the appropriate property interests 3. A new TIC (tenants in common) agreement for all four owners This helps substantiate the tax treatment and ensures everyone understands their rights and responsibilities going forward. The K-1 reporting is important, but the legal documentation is equally crucial.

This is a great discussion covering all the key technical aspects! Just wanted to add one practical tip from my experience with similar situations in ProConnect: Before you process the property distribution in the software, make sure to run a detailed partner capital account reconciliation report. This will show each partner's outside basis components before the distribution, which is crucial for calculating the correct basis adjustments. Also, when you're in the K-1 distribution section and selecting the property from the asset list, pay close attention to how ProConnect allocates any accumulated depreciation. I've seen cases where the software doesn't properly split the depreciation between distributed and retained portions, especially when only part of a property's ownership is being distributed. One more thing - after processing everything, generate a detailed K-1 with attachments to review exactly what statements ProConnect is creating. You may need to customize or supplement these to ensure they include all the required details about the property's characteristics, holding period, and any special allocations. The learning curve is steep with these complex distributions, but once you work through one properly, the process becomes much clearer for future cases!

Don't forget state taxes! Depending on which state you live in, the BDIT might be subject to state-level income taxes too. I live in CA but my trust was established in Nevada, and I discovered I still had to pay CA tax on all the income since I'm the deemed owner as beneficiary. Some states have different rules for taxing trusts than the federal government does.

One more thing about your BDIT that might be relevant - make sure you understand the "defective" aspect fully. The trust is "defective" only for income tax purposes, meaning you pay income taxes on all trust income as if you owned the assets directly. However, for gift and estate tax purposes, the trust is still treated as separate from you, which is why your grandfather was able to make the gift without it being included in his estate. This dual treatment is actually the whole point of a BDIT - your grandfather gets the benefit of moving appreciating assets out of his estate while you handle the income tax burden. Just wanted to clarify this since the terminology can be confusing when you're new to trust taxation. The $75,000 you received definitely goes on your personal return, and you'll want to make sure you have adequate records of the trust's activities since you're responsible for the tax compliance.

Just my two cents - I messed up my W-4 last year and ended up owing $4,200 at tax time! Don't underestimate how important it is to get this right. My wife and I both checked the "Married filing jointly" box without doing Step 2, and it was a disaster because the system assumed each of us was the only income earner.

Based on your situation, I'd strongly recommend taking the time to work through the IRS withholding calculator even though it's tedious. With your combined income of $153K and the new homeownership, getting this wrong could be costly. Here's a simplified approach: Both of you should select "Married filing jointly" and complete Step 2. Since your incomes are relatively close ($72K vs $81K), the Multiple Jobs Worksheet will be more accurate than just checking the box in Step 2(c). Complete the worksheet once together and enter the result on your wife's W-4 (higher earner) in Step 4(c), while you just check the box in Step 2(c). For your new home, estimate your annual mortgage interest and property taxes, then enter that amount in Step 4(b) on ONE of your forms (don't double up). This will reduce withholding to account for itemizing. Pro tip: Update your W-4s again once you have kids - the child tax credit will significantly change your optimal withholding strategy. Better to adjust multiple times throughout the year than owe thousands in April!