I'm in a similar boat - just started my LLC this year and was totally confused about the tax implications. After reading through all these responses, it sounds like the key thing to understand is that even though your business income gets reported on your personal return via Schedule C, you're still only taxed on the profit (revenue minus expenses), not the gross revenue. What helped me wrap my head around it was thinking of Schedule C as a separate "section" of your personal return that keeps all the business stuff organized in one place. You still get all your business deductions and it's clearly separated from your personal income - it just happens to be attached to the same Form 1040. If you're really set on completely separate returns though, the S-Corp election sounds like the way to go, especially if you're making good money from the LLC. Just make sure to factor in the additional complexity and costs before deciding.

One thing that really helped me understand LLC taxation was realizing that "pass-through" doesn't mean your business and personal finances get jumbled together - it just means the profits pass through to your personal tax return rather than being taxed at the business level first. You can (and should) still maintain completely separate business bank accounts, bookkeeping, and records. The Schedule C form actually reinforces this separation by requiring you to detail all your business income and expenses separately from your personal stuff. It's like having a dedicated business section within your personal tax return. The key insight is that you're not paying taxes on your gross business revenue - only on what's left after all legitimate business expenses. So if your LLC brings in $100K but has $60K in valid business costs, you're only adding $40K to your personal taxable income. All those business deductions (equipment, home office, travel, etc.) reduce your tax burden dollar for dollar. If the organizational aspect is really important to you, consider using separate accounting software for your LLC that generates clean reports you can easily transfer to Schedule C. This gives you the mental separation you want while keeping things simple tax-wise.

I went through this exact same situation when I first set up my S Corp! The key thing to remember is that as a >2% shareholder, you're treated differently than regular employees when it comes to health benefits. Here's what I learned the hard way: If your S Corp pays your health insurance premiums directly, those premiums MUST be included as taxable wages on your W-2 (though they're exempt from FICA taxes). Then you can deduct them on your personal return using the self-employed health insurance deduction on Form 1040. For other medical expenses (copays, prescriptions, etc.), your S Corp generally can't just pay these as business expenses. You'd need to either pay them personally or set up a formal health reimbursement arrangement like a QSEHRA. One mistake I made initially was trying to run random medical expenses through the business without proper documentation - my accountant had to clean that up later. Make sure you keep detailed records and follow the proper procedures! The good news is that once you get the system set up correctly, it can actually save you money compared to paying everything with after-tax dollars personally.

Great thread! I'm dealing with similar S Corp medical expense questions right now. One thing I wanted to add that hasn't been mentioned yet - make sure you're also considering state tax implications. Some states don't follow the federal treatment of S Corp health insurance premiums, so you might need to make adjustments on your state return. Also, regarding the timing - if you're setting up health insurance or a QSEHRA for this year, you generally need to have it established before the end of the tax year for it to be deductible. Don't wait until you're preparing your tax return to figure this out! I learned this lesson when I tried to retroactively claim health insurance premiums I had paid personally - the IRS requires that the S Corp actually pay the premiums during the tax year, not reimburse you later. The documentation trail matters a lot for audit purposes. For anyone just starting out with an S Corp, I'd recommend getting this health benefit structure sorted out early in the year rather than scrambling at tax time like I did my first year.

Has anyone had the IRS apply their overpayment to a state tax debt? I heard they can do that but not sure if its automatic or if you have to request it?

I went through something very similar last year with back taxes from 2021. The IRS will definitely refund any overpayment automatically - no special forms needed. What helped me was creating an online account at irs.gov so I could track the status of my payment and see exactly how they calculated the penalties and interest. One thing to keep in mind: if you made the payment recently, it can take up to 6-8 weeks for them to fully process everything and issue the refund. They have to apply your payment, calculate the exact amount owed as of the payment date, and then process the overpayment. You should receive a notice explaining their calculations before the refund arrives. Also, double-check that you don't have any other outstanding federal debts (like student loans) because they might offset your refund against those before sending you the money. Good luck!

Just wanted to chime in as someone who went through this exact confusion last year! The W-2 wages on Statement A really threw me for a loop too. What helped me finally understand it was realizing that the partnership has to report ALL the information that ANY partner might need, regardless of whether it applies to your specific situation. So even though you might not need those W-2 wages for your calculation (if you're under the income thresholds), the partnership still has to include them because some of their other partners might be high earners who DO need that information for the wage limitation. It's kind of like how they report depreciation information even if you don't have any depreciation to deal with - they're covering all the bases for all partners. Once I understood that the partnership can't customize the reporting for each individual partner's tax situation, it made much more sense why there was all this "extra" information I didn't seem to need.

This is exactly the kind of partnership tax issue that trips up so many people! The W-2 wages on Statement A are there for the QBI deduction limitation calculation, but only if your taxable income exceeds certain thresholds. Here's the simple breakdown: If your 2024 taxable income is under $191,050 (single) or $382,900 (married filing jointly), you can completely ignore those W-2 wages. They won't affect your QBI deduction at all. You'll just take 20% of your qualified business income as your deduction, subject to your overall taxable income limitation. The W-2 wages only come into play as a potential limitation on your QBI deduction if you're above those income thresholds. Since most taxpayers fall below these levels, the partnership is essentially required to report information that the majority of partners won't even use. It sounds like you're probably in the clear to ignore the W-2 wage information entirely and just focus on calculating your 20% QBI deduction. The partnership has to include this data "just in case" any partner needs it, but it doesn't mean every partner has to use it in their calculations.

As someone who's been through this exact situation multiple times over the years, I can definitely relate to that anxiety! Three weeks feels like forever when you're waiting to hear back from the IRS, but you're actually still in the very early stages of their typical processing timeline. From my experience, the IRS operates on what feels like geological time compared to the rest of the world. I've had cases where simple documentation requests took 2-3 months to fully resolve, and that was considered normal processing time. The key thing to remember is that no news at this point really is just no news - not bad news. A few practical suggestions that have helped me cope with the waiting: First, make sure you have copies of everything you sent and note the exact date you mailed it. Second, if you haven't already, definitely set up an online account at irs.gov - even though updates might not show up there for weeks, it's better to have it ready. Third, try to resist the urge to call until you hit at least the 6-8 week mark, since they'll likely just tell you to keep waiting anyway. The waiting is absolutely the worst part of dealing with the IRS, but based on your timeline, everything sounds completely normal so far. Hang in there!

I'm going through something very similar right now - sent in documentation for a questioned deduction about 4 weeks ago and the silence has been absolutely nerve-wracking! Reading through everyone's experiences here has been incredibly reassuring though. What I've learned from this thread is that 3 weeks is actually still very early in the IRS timeline, even though it feels like an eternity when you're the one waiting. I love Andre's "geological time" description - that's exactly what this feels like compared to how every other organization operates! I took everyone's advice and set up an IRS online account last week, which at least gives me something productive to check instead of just obsessively watching my mailbox. Nothing new has shown up there yet, but it's good to have it ready for when updates do appear. The hardest part for me has been the complete lack of communication - not even an acknowledgment that they received my documents. But based on all the timelines people have shared here, it sounds like that radio silence is completely normal and doesn't mean anything went wrong. Thanks for asking this question, Molly! It's so helpful to know that other people are going through the exact same anxiety-inducing waiting period. We're all in this together!