I use a 60/40 split (60% salary, 40% distribution) for my consulting S-corp based on what my CPA recommended. But I've heard of people going as low as 30% salary in some industries. It really depends on your specific business and what comparable employees make.

Is this really true? I've never heard of S-corp owners being subject to minimum wage laws. Wouldn't that defeat the purpose of being able to set a "reasonable" salary?

You're right that there's some confusion about this. The IRS's "reasonable compensation" standard is separate from minimum wage laws. However, as an employee of your corporation (even as the owner), you're still theoretically subject to FLSA minimum wage requirements. In practice, this rarely becomes an issue unless someone files a complaint. The bigger concern is that a very low salary compared to hours worked could trigger IRS scrutiny about whether your compensation is "reasonable." It's another data point they might use to challenge your salary if it's unusually low for your industry and workload.

Do you have to file special forms for the state disaster loss claim? My state tax form seems way simpler than federal and doesn't mention disaster losses anywhere.

You usually need to file an attachment or schedule with your state return specifically for casualty losses. Many states have their own version of the federal Form 4684. Check your state's department of revenue website - they often have specific instructions for disaster victims in federally declared disaster areas. Some states automatically conform to federal tax treatment, while others have their own rules. The good news is that several states are more generous than the federal government and don't apply the 10% AGI limitation.

You don't have to wait for FEMA to file your taxes, but you'll need to reduce your loss amount by any FEMA payments you expect to receive. If you file before getting FEMA money and then receive it later, you might need to report it as income on next year's return, depending on how much tax benefit you got from the deduction.

Does that 4-year rule apply to employees or just to employers? Like, do I as a regular employee need to keep my W-2s for 4 years, or is that just for businesses?

The 4-year retention rule for employment tax records applies primarily to employers who need to maintain payroll records, tax forms, etc. However, as an employee, it's still wise to keep your W-2s for at least 4 years too because they're essential for verifying your Social Security contributions and earnings history. If there's ever a discrepancy in your Social Security earnings record (which can happen), having those W-2s can be crucial evidence. The Social Security Administration can make corrections to your earnings record beyond the typical IRS audit period, so having documentation for longer than 3 years can be important for your future benefits.

Do you have a recommendation for a good shredder brand? Mine keeps jamming every time I try to do more than 2-3 pages.

That's really helpful to know about your audit experience. Did they give you a hard time about the missing receipts initially? How long did the whole audit process take from start to finish?

They definitely asked for the receipts first and I had a moment of panic when I couldn't produce many of them. But when I showed my expense tracking spreadsheet along with the corresponding bank statements, they were pretty reasonable about it. They focused way more attention on verifying my larger deductions like my home office and some camera equipment I bought for my online business. The whole process took about three and a half months from the initial letter to resolution. It was stressful but not nearly as bad as I expected. The key was being organized with the records I did have and being able to explain my business purpose for each category of expense.

I'm doing online tutoring! I use the notebooks and folders to organize materials for different students, printer paper/ink for worksheets, and pens/markers for creating visual aids. So everything is pretty directly tied to my actual work activities.

This is so true! I'm a freelance designer and my art supplies are obviously business expenses, but when I tried deducting general office stuff like a stapler and paper clips, my tax guy said those are harder to justify without good documentation.

Thanks for breaking it down like this! I definitely don't have rental properties or a complex business - just regular W-2 income and some stocks. This makes me feel much better about trying it myself. Do you have a preferred tax software you'd recommend?

I've used both TurboTax and H&R Block over the years. TurboTax has a slightly better interface and is more user-friendly for beginners, but it's also more expensive. H&R Block is cheaper and gets the job done just as well once you get used to it. If your situation is relatively straightforward, I'd also look at FreeTaxUSA - it's much cheaper than the big names and handles all the basics plus investments really well. TaxSlayer is another good budget option. All of these will walk you through everything step-by-step, so you really can't mess it up too badly.

This isn't really accurate advice. Your experience sounds like you might have made mistakes in your self-filing, but that doesn't mean everyone will. I make over $100k and have been self-filing for years with no issues. Tax software is designed to find deductions through its questionnaire process.