Thanks for sharing your experience! Do you think it makes sense to form an S-corp right away when switching from single-member LLC to having employees? Or should I stay as an LLC taxed as a partnership first until I hit that $40-50k profit consistently?

I'd recommend staying as an LLC taxed as a partnership first until you're consistently hitting that profit threshold. You can always convert to an S-corp later, and it's much easier than going the other direction. The LLC with employees will still give you the liability protection you need, but with less administrative overhead. One thing I forgot to mention - with an S-corp, you must pay yourself a "reasonable salary" before taking distributions. The IRS watches this closely. For construction contractors, that's typically 60-70% of your profit as salary at minimum. So if your profits are tight or inconsistent, the S-corp advantages diminish since most of your income will need to be salary anyway.

This is so true. I undercharged for years and was always broke. When I finally raised my rates by 25%, I lost maybe 10% of clients but made WAY more money overall. And the clients I kept were the ones who respected my work and didn't nickel and dime me to death.

Thank you for this insight - that's really helpful to know about them looking at earning potential. I have a question though - my earning history has been inconsistent because of contract work, with some years much higher than others. Will they just look at my highest earning year and assume that's my potential? Or do they take into account the volatile nature of contract work?

They typically look at an average of your recent years, but they'll definitely take into account your highest earning years as an indication of what you're capable of earning. However, if you can document that the contract work was irregular or that the industry has changed (especially with the company going bankrupt), that can help your case. Make sure to thoroughly document why your past income isn't representative of future earnings. Include any industry changes, health issues, or other factors that limit your earning potential going forward. The more documentation you provide showing why your situation has permanently changed, the better your chances of having them accept a reduced earning potential calculation.

Did you use a tax professional or do it yourself? I've been watching YouTube videos about the OIC process but everyone makes it seem so complicated. How long did the whole process take from application to acceptance?

I did it myself, though I spent about 3 weeks researching and preparing before submitting. It's definitely complicated but doable if you're organized. The whole process took about 9 months from submission to final acceptance. The key was being extremely thorough with the financial information and documentation. I literally sent them a binder with everything tabbed and indexed. The IRS assigned an offer examiner who called me twice to clarify some expenses, but otherwise the process was mostly waiting. When I got the acceptance letter, I paid the agreed amount within a week, and they released the federal tax lien about 30 days later. Just be prepared for a lot of paperwork and patience!

Oh no, I hadn't even thought about state taxes! We're in New York - do you know if they follow the federal rules for foreign income or have their own system? This is getting more complicated by the minute.

New York generally follows federal rules for income inclusion, so if you're reporting the rental income on your federal Schedule E, you'll need to include it on your NY return too. The one benefit is that NY does allow credits for foreign taxes paid, similar to the federal system. Some states like Nevada or Florida might be more advantageous for people with significant foreign income since they don't have state income tax. But for now, plan on reporting that Belgian rental income on both federal and NY returns.

Good point! Though I think Form 8833 is only required if you're taking a position that's contrary to the treaty or if you're claiming the treaty overrides an internal US law. Not everyone with foreign property needs it.

Wait really? I had no idea about quarterly payments! So even though I'm filing for 2024 now, I'm supposed to already be making payments for 2025? How do I even calculate how much to send if I don't know exactly what I'll make this year?

That's right! For 2025 income, you need to make four payments throughout the year. You have a couple of options for calculating how much to pay. The simplest is to take your total expected tax for the year and divide by 4. You can base this on what you expect to earn this year. Alternatively, you can use the "safe harbor" provision - if you pay either 90% of this year's tax or 100% of last year's tax (whichever is smaller) through withholding and estimated payments, you won't face penalties. So once you file your 2024 taxes, you could use that amount as your guide for 2025 payments. The IRS Form 1040-ES has worksheets to help calculate this. It seems complicated at first, but it gets easier after your first year!

Seconding FreeTaxUSA! The self-employment section is really straightforward. Plus it's way cheaper than TurboTax. They have good explanations about what counts as a business expense too. I was able to deduct part of my phone bill, internet, computer, camera equipment, editing software, and even some travel costs related to content I was making.

Thanks for this advice! I checked and the second form is dated 10 days after the first one. I'll definitely send it certified mail with tracking. Should I also include a copy of my payment confirmation with the signed form?

Yes, absolutely include a copy of your payment confirmation with the signed form. This creates a clear paper trail showing you've both agreed to the adjustment and paid the amount due. I'd also recommend writing your Social Security number and tax year on every page you send them. This helps ensure your documents stay together if they get separated during processing.

This happens more than you'd think. The IRS exam department sometimes issues preliminary findings before they have all information. Usually it's because they received additional third-party reporting after the first assessment. Likely something like a 1099 or K-1 that wasn't originally matched to the return.