I've considered that option but there's a specific reason I'm sticking with the company plan. They have access to some institutional funds with extremely low expense ratios that aren't available in individual plans. Plus the plan administrator handles all the compliance testing and Form 5500 filing, which I'd otherwise need to manage myself once the solo 401k exceeds $250k. Also, there's a potential opportunity in the future for me to be brought on as a W-2 employee, so staying in their plan makes that transition smoother. I just need to figure out the proper tax treatment for now.

Those are excellent reasons to stick with the company plan. The institutional fund access alone can save you significant money over time with those lower expense ratios. And you're right about the Form 5500 requirements - that paperwork gets complex fast when you're handling it yourself. For the proper tax treatment, one additional document that might help your CPA get comfortable is IRS Notice 2012-8, which provides specific guidance on affiliated service group arrangements. It clarifies that contractors who qualify under 414(m) should treat their contributions similarly to self-employed individuals with their own plans, but within the structure of the larger company plan.

Form 8606 is specifically for IRAs and reporting nondeductible contributions to traditional IRAs or Roth conversions. It doesn't apply to 401(k) contributions, whether in an affiliated service group or otherwise. Using this form would actually create more confusion.

Is it really worth switching tax software at this point? I'm halfway through my return in TurboTax and have a similar K-1 issue. Will H&R Block let me import what I've already done or would I have to start over?

Unfortunately, you'd likely need to start over if you switch software at this point. The import functions between competing tax products aren't great and often miss details. If you're already halfway through your return in TurboTax, your best option is probably to upgrade to their live help version rather than switching entirely. The TurboTax live tax pros can walk you through entering the statement items correctly, and that would be less frustrating than starting over in a new system. Just make sure you specifically ask about entering K-1 statement items, as some of the more general support people might not be familiar with the nuances.

You report K-1 income in the tax year shown on the K-1 itself, not when you physically received the form. If the K-1 says "2023" at the top, it goes on your 2023 return, even if you received it recently in 2024. Estates can take time to process, which is why K-1s often arrive late. If the K-1 is for 2023 and you've already filed your 2023 return, you'll need to file an amended return to include this information.

Is there an income threshold where you have to pay back the entire premium tax credit? I heard something about 400% of the federal poverty level but not sure if that's still accurate.

Yes, there is a threshold, but the rules have changed recently. Previously, if your income exceeded 400% of the Federal Poverty Level (FPL), you would have to repay the entire Premium Tax Credit amount. This was often called the "subsidy cliff." However, the American Rescue Plan temporarily eliminated this cliff, and this provision has been extended through 2025. Now, regardless of income, no household is required to pay more than 8.5% of their income toward benchmark marketplace coverage. This means even if your income ends up higher than expected, you're still eligible for some amount of Premium Tax Credit if your insurance premiums exceed 8.5% of your household income.

This! My husband's employer insurance wanted $650/month to add me, but I got a marketplace plan with Premium Tax Credit for $175/month. Just make sure your dad's plan is considered "affordable" for him only - if it is, and it only covers him (not dependents), you and your sister can still qualify for PTCs.

Exactly! The "family glitch" fix that went into effect means that affordability for family members is now calculated separately. So if adding dependents to the employer plan is expensive (which it often is), the dependents may qualify for Premium Tax Credits even if the employee has affordable coverage through work.

Wait, seriously? So if my husband has enough medical expenses to itemize but I don't, I can't take the standard deduction if we file separately? I had no idea about this rule!

Yes, that's exactly right. If one spouse itemizes on a separate return, the other spouse must also itemize - even if their itemized deductions are less than the standard deduction amount. It's one of those tax rules that can really hurt couples filing separately. This rule often creates a situation where a couple pays more in taxes by filing separately, even when it initially looks beneficial. For your example with medical expenses, you'd need to calculate whether the tax benefit from itemizing those expenses outweighs the loss of your standard deduction.

Does filing status affect the income limits for things like Roth IRA contributions? We're right on the edge of the phaseout range and I'm trying to figure out if filing separately would help or hurt.

Can you explain more about these different classes of stock? How exactly would that help with the tax distribution problem? My LLC is thinking about restructuring and this could be useful.

Different classes of stock or membership interests can have different rights and characteristics, including how distributions are treated. For example, some operating agreements specifically define "tax distributions" as mandatory distributions made solely for the purpose of covering tax liabilities, separate from discretionary profit distributions. This doesn't necessarily change the tax treatment at the federal level, but it does provide clarity in the operating agreement about the purpose and handling of these distributions. It can also affect how these distributions are treated for accounting purposes and in any member disputes. For your LLC restructuring, consider having your operating agreement specifically address tax distributions - when they're calculated, how they're calculated (including which tax rate to use), and the timing of payments. This clarity can prevent future disagreements.

In an LLC taxed as an S-Corp, you're mixing up a couple of concepts. For an S-Corp (or LLC taxed as one), you as the owner pay taxes on your share of the company's profits regardless of distributions. The distributions themselves aren't what create the tax liability - the company's profits do. So if your S-Corp makes $100,000 in profits, you'll pay tax on your portion of that $100,000 whether you take distributions or not. Distribution A isn't creating a new tax liability - you already have the tax liability from the profits. Distribution B is just giving you more cash from the company, not creating additional taxable income. This is different from C-Corps where distributions (dividends) themselves are taxable events.