This is slightly off-topic, but has anyone been audited for ERTC claims? My S-Corp got the refund for 2020-2021 (about $62k), and I'm working on the amendments now, but I'm hearing horror stories about aggressive audits specifically targeting ERTC. I'm reducing the wage expense by the full amount as others have said, but I'm worried about whether our original claim will be scrutinized. We had a 37% revenue drop in the qualifying quarters, so I think we're solid, but these rumors about audits have me nervous.

I went through this exact same situation with my S-Corp last year! The key thing to remember is that you reduce wage expenses by the FULL ERTC amount you received (minus any interest). This includes both the refundable and nonrefundable portions. When I was doing my amendments, I made the mistake initially of only reducing by the refundable portion, but my CPA caught it and explained that the IRS considers the entire credit as essentially reimbursing wages you already deducted. You can't get a tax benefit twice for the same expense. Make sure you're amending the correct tax years - so if you got credits for 2020 Q2-Q4 and 2021 Q1-Q3, you'll need separate amended 1120S forms for each year. Also, don't forget that these wage expense reductions will flow through to your K-1 and affect your personal return too. Good luck with getting everything sorted before your accountant gets back! Having all your documentation organized will definitely make that meeting go much smoother.

Think of the 'still processing' message like a waiting room at a doctor's office. You're in the building, but not yet with the doctor. Your return is like a patient in that waiting room - it's in the IRS system, but not actively being reviewed by an agent yet. Have you tried checking your tax transcript instead? Sometimes it shows more detailed status information than the WMR tool, similar to how a nurse might check your vitals before the doctor sees you.

I've been dealing with this same situation for about 12 weeks now. Filed my amended return in December to claim some missed deductions, and it's been stuck on "still processing" ever since. What I've learned from calling the IRS (after multiple 3+ hour wait times) is that the message really is just a generic placeholder. The agent told me my return is actually in their "Error Resolution System" which handles all amended returns, and they work through them in the order received. She couldn't give me a specific timeline but confirmed it was moving through their system normally. The frustrating part is that unlike regular returns where you get status updates, amended returns basically stay silent until they're done. I've started checking my transcript weekly instead of the "Where's My Amended Return" tool since it sometimes shows processing codes before the online status changes.

Another option you could consider is forming an S-Corp instead of a partnership. That would allow you to be both an owner AND an employee. You could take a reasonable W-2 salary (saving on SE tax for amounts above that salary) and then take distributions for the rest of your share. Obviously there are other factors to consider with entity selection, but I switched from a partnership to an S-Corp specifically because of this salary issue and it's saved me thousands in self-employment taxes.

I went through this exact situation when I started my consulting partnership. The guaranteed payment route that Keisha mentioned is definitely the right approach - it's specifically designed for situations like yours where one partner is doing the operational work. One thing I'd add is to make sure your partnership agreement specifies that these guaranteed payments are made regardless of partnership profitability. This protects your monthly income even if the business has a slow period. We learned this the hard way when our first quarter was rough and my partner questioned whether I should still get paid. Also, consider setting up a separate business checking account just for your guaranteed payments. It makes the bookkeeping much cleaner and helps with quarterly tax planning. I transfer 35% of each payment to a tax savings account immediately - better to overestimate than get hit with penalties. The IRS has some good examples in Publication 541 that show exactly how guaranteed payments work in different scenarios. Worth reading before you finalize your partnership agreement!

Just a quick heads up that the penalties for not filing Form 8865 when required are pretty brutal. We missed filing it for our Australian partnership and got hit with a $10,000 penalty per year plus reduced foreign tax credits. If you have any doubt at all, it's better to file the form than risk the penalties.

Mae, you're absolutely right to be confused - this is one of those areas where the terminology can be really misleading! To add to what others have said, the IRS definition of "foreign partnership" is very specific and literal - it's only about where the partnership entity was legally formed/organized, period. Your Delaware LLC is definitely domestic for tax purposes. However, there are a couple of additional things to keep in mind with a foreign partner: 1. Your partnership will likely need an EIN if you don't already have one 2. You'll need to determine if your UK partner has a US tax identification number (ITIN or SSN) for the K-1 3. As others mentioned, there may be withholding requirements under Section 1446 depending on your business activities The good news is that having a foreign partner in a domestic partnership is actually pretty common and well-established in tax practice. Just make sure you're working with someone who understands the withholding rules - that's usually where people trip up, not on the Form 8865 question you originally asked about.

Has anyone here tried connecting their accounting software with their bank? My CPA recommended it but I'm worried about security issues.

This is such an encouraging story! As someone who also struggled with QuickBooks initially, I can totally relate to that feeling of everything just "swimming together." The balance sheet was like a foreign language to me. I'm curious - what specific AI tool did you end up using? I've been hesitant to try AI for accounting stuff because I wasn't sure how reliable it would be for financial decisions. But your experience sounds really positive, especially the part about being able to ask follow-up questions without judgment. For other woodworkers reading this - did you find any industry-specific challenges when setting up your books? I'm thinking about things like tracking raw materials inventory, handling custom orders, or dealing with the seasonal nature of some woodworking businesses. Would love to hear how you approached those aspects!