That makes so much more sense! I was worried my entire income would get hit with the higher rate. What about the freelance income though? Is that taxed differently than my regular job income?

Your freelance income is subject to both income tax (at the same progressive rates as your W-2 income) AND self-employment tax, which is an additional 15.3% to cover Social Security and Medicare. This is because when you're self-employed, you're paying both the employer and employee portions of these taxes. You can deduct business expenses from your freelance income though, which helps reduce both taxes. Things like supplies, software subscriptions, and potentially a portion of your home office if it's used exclusively for the freelance work. Just keep good records of everything!

This is correct! I work as a tax preparer and see this mistake ALL THE TIME. The home office deduction is only for self-employed people (Schedule C filers) or certain statutory employees. Regular W-2 employees can't take this deduction anymore after the Tax Cuts and Jobs Act.

Thanks for this straightforward advice! Do you have to attach any special forms or documentation when you write "NRA" for your spouse? I'm worried about my return getting flagged for review if I just write that in.

No special forms needed when filing separately with an NRA spouse! The IRS is completely familiar with this situation. Just write "NRA" in the space for the SSN and proceed normally. I've been doing it for 7 years and never had a return flagged or questioned. The only time you need additional forms is if you're claiming your spouse as a dependent (which you generally can't), filing jointly (which requires an ITIN and a special election), or if your spouse had US income. For a simple MFS with an NRA spouse with no US ties, it's very straightforward.

This is really important advice! My friend got stuck with a huge tax bill because her estranged husband in Germany had unreported income when they filed jointly. The IRS came after her even though she had no idea about his finances!

Thanks for bringing this up. We've been keeping personal and business finances separate, but we haven't been holding any formal meetings or keeping minutes. For board meetings, is this something we need to do monthly? And what kind of documentation should we keep for distributions?

You should hold and document board meetings at least quarterly, though monthly is better when you're making regular financial decisions. The minutes don't need to be elaborate - just record date, who attended, key decisions made (especially about finances), and have them signed. For distributions, create a simple corporate resolution for each one stating the amount, distribution date, and that it was approved by the board. Make sure distributions are proportional to ownership (51/49) unless you have specific documentation justifying otherwise. We got flagged because our distributions weren't matching our ownership percentages, which raised red flags with the IRS.

This is huge. I missed my first quarterly payment because I didn't understand S-Corp taxation and ended up with penalties. Talk to your accountant about setting up proper tax planning from day one.

Thanks for confirming this. When my S-Corp started making real money, I had no idea about estimated taxes and ended up with a huge tax bill plus penalties the following April. It's especially important with your 51/49 split - both of you will need to make individual quarterly payments based on your share of the profits, even before you take distributions.

This seems to be a common pattern. Was there anything in their contract about what happens in case of rejection? Did you sign something saying fees aren't refundable?

The contract had very fine print saying fees were "earned upon submission" regardless of outcome. They also claimed their "proprietary review process" determined we were eligible, which gave us false confidence. Looking back, there were red flags - they never asked for documentation of actual business impact or government orders affecting us. They just wanted payroll records and made big promises about getting "maximum credits.

We used them for our restaurant. They were thorough but incredibly slow. Took them 3 months just to prepare our claim after we provided all docs. Their fee was reasonable (15%) but they only collect after you get paid. Still waiting on our money 11 months later, but at least they check in monthly with updates.

Do you know if you can amend through a different service than you originally filed with? I used FreeTaxUSA for my original return, but I've heard their amend feature isn't great.

Unfortunately, you generally need to amend through the same service you used for your original return. This is because the amend feature needs to access your original tax data as a starting point. If you're not happy with FreeTaxUSA's amend feature, you could try contacting their customer support to see if they can help walk you through it. Alternatively, you could use a different service to create that "practice return" I mentioned to calculate your corrected amounts, but you'd still need to manually fill out the 1040X form. The IRS also has fillable PDF forms on their website that do some basic calculations for you.

This is really important info! Is there a way to calculate exactly how much interest I might owe? My amendment is from last year's taxes and I only just realized my mistake now.

The IRS uses a quarterly interest rate that changes periodically. For a rough estimate, the rate has been around 5-7% annually for the past couple of years. To calculate it, take the additional tax you owe, multiply by the interest rate (let's say 6%), and then calculate based on how many months have passed since the original due date. For example, if you owe $500 additional tax from last year's return that was due about a year ago, you'd be looking at roughly $30 in interest (500 × 0.06 = 30). There could also be a failure-to-pay penalty of 0.5% per month up to 25% of the unpaid tax. Your best bet is to pay as soon as possible to stop additional interest and penalties from accruing.