But won't the employees get in trouble if they file with forms they know are wrong? My manager told us we HAD to wait for corrected W-2s.

No, employees won't get in trouble for filing with incorrect W-2s as long as they file an amendment once they receive the corrected forms. The IRS understands that errors happen with tax documents. Your manager is being overly cautious. While waiting for corrected W-2s is certainly the cleaner approach, the IRS allows taxpayers to file with the information they currently have and then correct it later through the amendment process. Just make sure you keep both the original and corrected W-2s for your records, and file the amendment (Form 1040-X) promptly once you receive the corrected form.

Did any of your employees get audited because of this? That's what I'm most worried about.

Thanks for the tips! Do you have a specific system you use to organize all this? I'm worried about keeping track of all these little expenses throughout the year. Also, do you know if there's a minimum amount I should even bother tracking? Like if I grab a $3 coffee for my plumber, is that even worth documenting?

I use a simple three-folder system that has worked great for me. One folder for receipts (I scan them with my phone), one for expense logs (I use a basic spreadsheet with date, vendor, amount, purpose, and recipient), and one for property-specific expenses. Regarding minimum amounts - technically there is no minimum threshold for documentation. Even that $3 coffee should be documented if you're deducting it. During my audit, the IRS agent specifically looked for patterns of small undocumented expenses that added up over time. Those small $3-5 purchases can easily add up to hundreds of dollars annually, which is why they check them. Better safe than sorry!

Did your accountant say anything about providing these regularly vs occasionally? I give my maintenance crew donuts like every Friday when they come to check properties. Would that still count as "during work" or is it too regular to be considered that?

Good point - I'm in Minnesota. Does anyone know how MN handles capital gains taxes? Are they taxed differently than regular income at the state level?

Minnesota taxes capital gains as regular income, unlike the federal government which gives preferential rates to long-term gains. So you'll pay your normal Minnesota income tax rate on all your capital gains regardless of how long you held the investments. Minnesota's income tax rates range from 5.35% to 9.85% depending on your income bracket. Given your regular 22% federal bracket, you're probably looking at the middle Minnesota brackets (6.8% or 7.85%). There's no separate capital gains rate structure at the state level.

This is super important! Tax-loss harvesting saved me thousands last year. If you have any investments at a loss, you might want to sell those at the same time to offset some of your gains.

That's a great point about tax-loss harvesting. Just remember the IRS limits capital loss deductions against ordinary income to $3,000 per year. However, you can use capital losses to offset unlimited capital gains. Any unused losses can be carried forward to future tax years.

Would changing the payroll schedule that drastically cause problems with our employees? I'm thinking they might not like having their pay periods shifted around, especially around the holidays when cash is tight for many people.

It does require some careful communication with your team. We gave our employees about 3 months notice before implementing the change, and offered short-term advances to anyone who needed help with the transition. Most people adjusted within a month or two. It also doesn't have to be a permanent change - some businesses do a "bonus" mid-December payment that effectively prepays some January work, then return to normal scheduling in January. The key is getting those funds out of your business account before December 31st so they don't contribute to your year-end retained earnings.

C-Corp has double taxation though. They'd pay corporate taxes and then personal taxes on any dividends. With $9.5m ARR, seems like they'd end up paying more overall unless they plan to reinvest almost everything back into the business.

You're right about the double taxation concern. It works better for businesses planning significant reinvestment rather than regular profit distributions to owners. A possible middle ground might be the "hybrid approach" where they elect S-Corp taxation but establish a reasonable salary structure and timing that helps manage cash flow better throughout the year. They could also look into establishing separate entities for different business functions, though that adds complexity.

Do you include credit card tips in your journal too or just cash? And do you ever get audited? I always wonder how the IRS would even know what my actual cash tips were.

This is really smart advice, thank you! I'll open a separate savings account just for taxes. Is 25% enough to cover everything? Someone mentioned it could be 30%+ with the self-employment taxes.

For me, 25% has been enough, but it really depends on your total income and tax bracket. If you're already making good money at your W-2 job, you might need closer to 30-35% since this additional income could push you into a higher bracket. Better to overestimate and have money left over than underestimate and come up short! I actually adjusted mine to 30% this year since I'm making more overall, and it's been working out well. Just make sure that account is somewhat difficult to access so you're not tempted to dip into it.