But can't you set up a Solo 401(k) with a pass-through LLC too? I thought the entity type didn't matter for retirement plans, just whether you have employees or not.

You're absolutely right - I wasn't clear in my explanation. You can definitely set up a Solo 401(k) with a pass-through LLC. The distinction is more about how the contribution limits work. With pass-through taxation, your contributions are limited based on your net self-employment income, and you're essentially wearing both the employer and employee hat on the same income. With S-Corp taxation, because you're paying yourself a formal salary, the calculation can sometimes work out more favorably for maximizing contributions, especially as your business becomes more profitable. It allows for a cleaner separation between salary (which determines employee contributions) and business profits (which determine employer contributions).

My accountant gave me the same advice but with $100k as the threshold. I elected S-corp status too early (at around $70k profit) and ended up paying about $1,800 more in accounting/payroll services than I saved in taxes that year. Lesson learned!

Thanks for sharing your experience. That makes me feel better about my decision to stay as a pass-through for now. I'm hoping to hit that $80k threshold within the next two years, but until then, I'll keep things simple. Did you find the transition to S-corp status complicated when you did make the switch?

How do you apply for that First Time Penalty Abatement thing? Is it automatic or do you have to specifically request it? And what counts as "good compliance history"?

You need to specifically request First Time Penalty Abatement - it's not automatic. You can do this after you file the late return and receive a bill. Call the IRS using the number on your bill and specifically ask for "First Time Penalty Abatement" for your 2019 taxes. For "good compliance history," the IRS generally looks for no penalties in the prior three years and that you've filed all required returns and paid (or arranged to pay) any tax due. So if you didn't have issues with 2016, 2017, and 2018 taxes, you might qualify. Even if you're not sure you qualify, it's worth asking - the worst they can say is no.

I'm not OP, but I had a similar situation with unfiled 2018 taxes, and the IRS didn't contact me until almost 3 years later. With COVID, they got super backlogged. When they finally did reach out, the penalties had piled up like crazy.

Does internet service count as a qualified expense? My son lives off campus and needs internet for his classes but I'm not sure if that's covered.

Internet service is a bit of a gray area. If your son lives off-campus, internet service would generally be considered a qualified expense ONLY if it's required for enrollment or courses at the educational institution. If the school requires students to have internet access to complete coursework or access required materials, then it would likely qualify. It's best to get documentation from the school stating this requirement if possible.

This is exactly right! I did the same thing with FreeTaxUSA and it worked perfectly. The software needs to see the qualified expenses first before processing the 529 distribution.

I used TaxSlayer for my S-Corp last year. In the business version, look under the "Filing" menu and there should be an option for "Extensions" or "File Extension." It's not super obvious, but it's definitely there. If you can't find it, try going through the process as if you're going to file your return, and there should be an option somewhere that says something like "I'm not ready to file" which takes you to the extension option.

Found it! It was under "Other Forms" and then "Extensions" - not where I was looking at all. Thanks for pointing me in the right direction.

Oh man, I didn't even think about state extensions! I'm in Texas so I think I'm ok on state income tax, but I'll double check about franchise tax requirements. Thanks for bringing this up - these small details are exactly what I was worried about missing.

You're right about Texas not having state income tax, but definitely check on the franchise tax requirements. Most states have their own deadlines and procedures that don't always match up with federal. Glad I could help - these little details tripped me up badly my first year with my business!

I appreciate the perspective, but I think there's a difference between choosing Starbucks for their coffee (personal preference) versus needing an alternative workspace because my home office becomes unusable during certain hours due to childcare issues. It's not preference - it's necessity for my business operations. From what others have shared and my research, it seems like the library miles might qualify under the "temporary work location" rule, especially since I don't go to the same library every time and the trips aren't daily. But I'll definitely make sure to document the business necessity carefully.

I see your point about necessity vs. preference, which is fair. The temporary work location rule might apply, but remember it's usually meant for places you don't visit regularly. If you're going to the same library multiple times a week, the IRS might view it as a regular workplace. My suggestion would be to document extensively why your home office was unusable on specific dates (maybe keep a log of when kids are home and why you needed to work elsewhere) and be prepared to demonstrate the business necessity. The conservative approach would be to not claim the library miles, but if you do, make sure your documentation is rock solid.

I track my business mileage with MileIQ and it shows you a map of your route. It might help prove you went straight from grandparents to library without personal stops. It's like $6/month but worth it for the peace of mind during tax time.