This is really good advice. Different payroll systems handle the transition differently. I work in HR (not a tax expert though) and we've had tons of questions about this exact issue. Some systems use a "behind the scenes" conversion while others actually require you to fill out both the old and new formats.

Exactly! It's even more complicated because some of these systems were updated in phases. For my company, employees hired before 2023 still see the allowances language while newer employees get a different interface entirely. The most important thing is to make sure your actual withholding amounts align with your tax situation, regardless of how the form presents it. When in doubt, the payroll or HR department can usually provide a withholding calculator or estimate specific to their system.

Try using the IRS Tax Withholding Estimator (it's free on the IRS website). It's way more accurate than just guessing with allowances. You can adjust throughout the year too if your situation changes.

Thanks for the practical breakdown! Do you have any payroll services you'd recommend specifically? And how did you decide what salary to set for yourself?

I use Gusto for payroll and have been happy with it. Very user-friendly and they handle all the filings automatically. OnPay and Square Payroll are also good options that several of my contractor friends use. All run about $45-60/month depending on features. For salary, I researched construction project managers in my area on sites like Glassdoor and Indeed. The range was $90k-140k, so I settled on $120k as my reasonable salary. I also documented this research and keep it with my tax records in case of questions. My accountant suggested keeping the salary above 40% of business profit as a general rule to avoid red flags, but that varies by industry.

Yikes! I didn't know about state franchise taxes. Does anyone know what the requirements are in Texas?

Texas doesn't have state income tax but does have a franchise tax (also called margin tax). However, there's a threshold - businesses with less than $1.23 million in annual revenue are exempt. So for most small S-corps in Texas, you wouldn't owe this tax.

That's an interesting alternative I hadn't considered. Would the interest I earn be considered passive income? And would the business still be able to deduct the interest payments? Seems like it could be win-win if structured properly.

Yes, the interest you earn would typically be considered portfolio income (not passive income in the tax sense, but not subject to self-employment tax either). It's reported on Schedule B and taxed at your ordinary income rate. The business could generally deduct the interest payments as a business expense, subject to certain limitations if the business is very large (which doesn't sound like the case here). This creates a tax-efficient arrangement where the business reduces its taxable income and you receive income without the complications of partnership taxation. You could even structure it with an equity conversion option if the business performs well and you later decide you want ownership.

What tax software did you use to handle your K-1? I'm looking at a similar situation and wondering if TurboTax can handle it or if I need something more specialized.

I started with TurboTax but switched to a CPA halfway through. TurboTax can technically handle K-1s, but it doesn't provide much guidance for complex situations. If your K-1 is straightforward it might be fine, but mine had unusual allocations, guaranteed payments, and some weird depreciation issues from business property. The best advice I can give is to either use a more specialized tax software like UltraTax if you're comfortable with tax concepts, or just pay for a CPA who specializes in partnership taxation. It's worth the money to avoid the headache and potential errors. My CPA actually found several deductions TurboTax missed that more than paid for her fee.

You can request tax transcripts from the IRS for previous years. Go to irs.gov and search for "Get Transcript Online" - you'll need to create an account if you don't already have one. The transcript will show what you reported for interest income each year. Alternatively, if you used the same tax software in previous years, you might be able to access your old returns through that software. Most keep records for at least a few years.

Thanks for that info about the transcripts! I just logged in and was able to download my last 5 years of returns. I can see the interest income I reported each year, but it's not broken down specifically for savings bonds vs other interest. Is there a more detailed transcript that would show that breakdown?

I used TaxSlayer last year and they do have a specific section for savings bonds where you can enter previously reported interest. It's under "Federal → Income → Interest Income" and then there's a checkbox for US savings bonds that opens additional fields. Much more straightforward than FreeTaxUSA in my experience.

That's really helpful, thanks! I might make the switch then. Do you know if I can import my W-2 and other forms from FreeTaxUSA to TaxSlayer or would I have to re-enter everything manually?

Do you know if I can change the withdrawal date each month? My paychecks come on different days depending on the month.

When you set up a direct debit installment agreement with the IRS, you can choose a monthly payment date that works best for you - the 1st, 8th, 15th, or 22nd of each month. Unfortunately, you can't change the date each month - you have to pick one consistent date. Most people pick a date that's a few days after their typical paycheck arrives. If your pay schedule varies that much, you might want to consider keeping a buffer in your account or choosing a date later in the month.

Yes, there's a setup fee, but it's lower if you choose direct debit vs. other payment methods. I think it's around $31 for direct debit if you set it up online. Regular installment agreements have higher fees (like $149). If your income is below a certain threshold, you might qualify for a reduced fee or fee waiver. Check out Form 13844 for fee reductions based on income.