Just a heads-up that prepaying property taxes to maximize deductions doesn't always work as expected. I tried to prepay a bunch of my property taxes in December 2020 to get under the SALT cap, and my accountant said some of them weren't deductible because they weren't actually "assessed" yet. Apparently there's a rule that you can only deduct property taxes that have been officially assessed by the taxing authority. So if your second installment has been assessed (meaning you have an official bill), you should be fine to pay and deduct it early. But if it's not technically assessed yet, you might run into issues.

Have any of you ever had success getting your supplemental property tax bill reduced? We just got a MASSIVE one from when we bought in 2021 (apparently backlogged due to covid). The assessment seems way off compared to what we actually paid for the house.

The limited definition problem extends beyond just progressive taxation. I teach economics, and textbooks routinely oversimplify tax concepts to make them easier to teach, which unfortunately gets repeated everywhere. Real-world tax systems are incredibly complex with multiple overlapping philosophies. For example, the US corporate tax system has elements of: 1) Income-based progression (higher rates on higher income) 2) Industry-specific rates (differential taxation) 3) Behavior-based incentives (R&D credits, etc.) 4) Profit-rate considerations in certain cases But students only learn the basic "tax rate increases as income increases" definition, which gets repeated throughout their education and careers. It's similar to how we teach supply and demand curves as always being straight lines when they rarely are in reality.

I actually wrote my dissertation on this exact topic! The reason "progressive taxation" is so narrowly defined is because of a deliberate political choice in the early 20th century. When modern income tax systems were being developed (1910s-1930s), there were competing proposals for progressive taxes based on wealth, land value, corporate profit rates, and income. The income-based approach won out partly because it was easier to implement with the administrative capabilities of the time, but also because it was less threatening to accumulated wealth. A progressive wealth tax would have directly challenged the existing power structures more than income taxes. By focusing the definition of progressive taxation exclusively on income, it shifted the burden to high-income earners while protecting those with substantial accumulated wealth. This definition then became codified in academic literature, policy discussions, and eventually public understanding.

One approach my accountant suggested was to look at what I'd have to pay someone else to do my job. If you'd have to pay someone $30k to do the work you do in your business, that's a good benchmark for "reasonable compensation" regardless of profitability. My S-corp is slightly bigger (around $120k gross), but I take a $36k salary which is what we determined would be the replacement cost for my specialized work. I've also documented WHY this is reasonable in case of audit - job listings for similar positions, industry salary surveys, etc. The benefit of S-corps is avoiding SE tax on distributions, but you have to play by the reasonable salary rules to get that benefit. Otherwise, the IRS position is basically "if you want to take all distributions, just be a sole prop or LLC.

Has anyone used the "minimum wage" method for establishing reasonable compensation? My CPA suggested that at minimum, I document all hours worked in the business and pay myself at least minimum wage for those hours as salary. For example, if I work 20 hours a week (1,040 hours/year) and minimum wage is $15/hour, my minimum reasonable salary would be $15,600. He said this approach works better for businesses with low profit margins, and it's easier to defend than a percentage of revenue or profit.

Just a tip from someone who went through this exact situation with the Recovery Rebate Credit and CP13 notice - make sure you keep copies of EVERYTHING you send to the IRS and send it via certified mail so you have proof of delivery. The IRS is notorious for "losing" correspondence, especially with these stimulus payment disputes. Also, when you write your response letter, put your notice number, tax ID, and tax year in the subject line AND at the top of every page. Make it super obvious what your letter is about. And be really clear and direct about why you're eligible for the Recovery Rebate Credit despite being claimed as a dependent on someone's 2019 return.

Just a heads up that if you were claimed as a dependent on ANYONE'S 2019 return, you were technically ineligible for the first two stimulus payments as an individual. The law was written that way, even if the person who claimed you didn't receive a payment for you either. This is a really common misunderstanding about the Recovery Rebate Credit. Even if you weren't properly claimed as a dependent (like in your case where you probably didn't qualify as one), the fact that someone DID claim you is what matters to the IRS automated systems.

Former restaurant manager here. This happens way too often because payroll systems for restaurants are notoriously bad at handling tip pools correctly. Here's what should happen: 1) Server reports total tips received 2) Server reports tip outs to support staff 3) Server is only taxed on tips retained 4) Support staff report and pay taxes on their share Most POS systems track this, but many payroll processors don't implement it correctly. If your manager won't fix it, document everything and talk to the owner. This is actually costing them money too since they pay employer payroll taxes on inflated wages.

This happened at every restaurant I've worked at. The worst part is when tax time comes and the IRS thinks you made WAY more than you actually did! Has anyone successfully gotten this fixed retroactively? Like for previous tax years?