What about VAT/sales tax collection though? That seems like a legitimate reason to use these services - handling all the state-by-state sales tax requirements in the US is a nightmare for foreign businesses.

Sales tax collection is indeed one of the few legitimate benefits these services can provide. The US sales tax system is notoriously complicated with different rules across 50 states plus local jurisdictions. Having a US entity handle that complexity can be valuable. However, there are specialized sales tax compliance services that can handle just this aspect without the problematic "company rental" structure. Services like Avalara or TaxJar can manage US sales tax compliance for foreign companies at a much lower cost than these rental arrangements. You'd still need to register for sales tax in relevant states, but these specialized services can handle the calculation, collection and filing without the questionable tax structure these rental companies use.

Did setting up a proper LLC end up being much more expensive than the rental option? These services charge like $500/month which seems steep but cheaper than maintaining a full legal entity with annual fees, registered agent, etc.

Do you feel like it finds all the possible deductions? That's my main worry - missing out on money I should be getting back.

It walks you through all possible deductions and credits with a comprehensive questionnaire just like the expensive services do. For someone in your situation, it asks about education expenses, student loan interest, retirement contributions, and other common deductions. I actually found FreeTaxUSA to be more transparent about explaining which deductions you qualify for compared to TurboTax. They don't hide information behind paywalls or try to upsell you constantly. Every time I've compared my results between multiple tax programs, the refund amount has been identical because ultimately it's all based on the same tax laws.

I don't completely agree. While the tax code is the same, different software definitely asks different questions which can lead to finding deductions someone might miss. I've personally gotten different results between programs.

Direct File is only for simple personal returns right now, not for business returns or extensions. For your 7004, you'll need to either use commercial tax software, have your accountant e-file it, or mail in a paper form. I've been using FreeTaxUSA for my S Corp returns for years - they handle the 7004 extension filing too and it's pretty straightforward.

Thanks for clarifying! I'll stick with my regular tax software then. Wish the IRS would expand these services to small businesses too.

Most COVID-related tax provisions have expired now. For the 2025 filing season (2024 tax year), things have largely returned to pre-pandemic rules. Employee Retention Credits ended, PPP loan forgiveness is old news, and the special sick leave credits are gone. The only lingering effects might be if you're still carrying losses forward from the pandemic years, but the special expanded rules for those have mostly reverted to normal too.

That's actually a good point I hadn't considered. I assumed my accountant had only filed the S Corp extension, but maybe there was confusion and they filed something for my personal taxes too? Though wouldn't that have shown up when I checked my IRS account online?

An extension request for your personal return typically wouldn't appear in your online account history the same way a filed return would. The IRS online account usually shows filed returns, not extension requests. Your accountant might have e-filed your extension without your knowledge thinking they were being helpful. However, that still doesn't explain the specific error code you received, which indicates an actual return was filed, not just an extension. If your accountant had filed an extension for you, you should still be able to e-file your actual return later. The fact that you got an "already filed" rejection strongly suggests either identity theft or a significant error, such as your accountant accidentally filing a return instead of an extension.

This is a hugely important point. Unemployment fraud and tax identity theft are closely linked now. You should check with your state unemployment office to see if there are any claims filed under your SSN that you didn't submit. If there are, you'll need to report that fraud to the state as well as to the IRS.

What exactly qualifies as Section 1231 property? And does this still apply if the assets are fully depreciated?

Section 1231 property includes depreciable property used in a trade or business that's held for more than one year. So your DJ equipment would typically qualify if you've owned it for more than a year, which it sounds like you have. Even fully depreciated assets can still benefit from Section 1231 treatment. The fact that they're fully depreciated just means your basis is zero (or close to it), but the character of the gain can still benefit from potentially favorable capital gain treatment. However, be aware that depreciation recapture rules may cause some or all of the gain to be treated as ordinary income anyway, particularly with personal property like equipment.

What tax software were you using? I'm using TurboTax and wondering if it handles this situation correctly or if I need something more specialized.

I was using H&R Block online, which I normally find pretty good for my basic tax needs. The problem wasn't really the software itself - it was that I didn't understand all the forms and steps needed for proper business dissolution. I missed filing Form 4797 for reporting the sale of business assets, and didn't properly document the conversion of business assets to personal use. No tax software can really help you make the strategic decisions about WHEN to sell assets versus when to convert them - it just processes the information you give it. That's why I suggest getting professional help for at least one session to map out your strategy before you start entering things into tax software.