Thanks for this info! I did file Form 1120-S for 2021 and issued myself W-2s, so sounds like I've been operating consistent with S-corp status. I was just confused about whether I could put January 1 as the effective date when my LLC wasn't technically formed until March. I'll definitely check Box D1 and explain the situation in Part III as you suggested. Do you think I should attach anything else to the form when I send it in? Like copies of my 2021 tax filings to prove I've been operating as an S-corp?

Yes, you should absolutely attach copies of your 2021 Form 1120-S and any W-2s you issued yourself as supporting documentation. This demonstrates to the IRS that you've been operating consistently as an S-corporation. Also consider attaching a brief cover letter referencing the IRS notice you received and explaining your intention to address this with the late-filed election. I'd also recommend sending it certified mail so you have proof of submission. The IRS can be slow to process these, so having documentation of when you submitted everything can be important if they follow up again before processing your election.

Good point! I made this mistake last year and they rejected my filing, adding another 2 months to the process. You can download the current version directly from irs.gov rather than using any forms that might be outdated on tax preparation websites.

Does anyone know if Texas accepts this MTC form? Their website is so confusing and I've gotten different answers from different people at their tax department.

Texas does accept the MTC form, but with some caveats. They're technically a member of the Multistate Tax Commission, but they sometimes require additional documentation if you're not registered in Texas and you're doing dropshipping where the final customer is in Texas. I've found it's always safest to call the state's department of revenue directly for your specific situation. The rules for dropshipping in particular vary tremendously between states and can change without much notice.

But don't you still need to provide resale certificates to your suppliers regardless of whether you have nexus in a state? My understanding is these are separate issues - nexus determines if you collect tax from customers, while certificates prevent you from paying tax to suppliers.

You're absolutely right - I should have been clearer. Nexus and resale certificates are related but separate issues. You need to provide resale certificates to your suppliers to avoid paying sales tax on purchases intended for resale, regardless of your nexus status. What I meant was that tracking your sales by state helps you determine where you need to register for sales tax permits, which you often need before you can get a valid resale certificate for that state. Some states will issue resale certificates even without nexus, while others require you to have nexus and be registered first.

Thanks for the solid advice! For the quarterly taxes, is it just a flat 30% of income or does it vary based on what expenses I've had that quarter? Also, do most banks offer business accounts to sole proprietors or do I need an LLC first?

The quarterly tax amounts should ideally be based on your actual profit for that quarter (income minus expenses), but many contractors use a simplified approach of setting aside a percentage of gross income to make it more manageable. The 30% is just a rule of thumb - your actual percentage might be higher or lower depending on your state tax situation and deductions. Most banks absolutely offer business accounts to sole proprietors - you don't need an LLC first. You'll typically need your Social Security number and possibly a DBA ("doing business as") registration if you're operating under a business name that's not your personal name. I'd recommend shopping around as some banks offer free business checking while others charge monthly fees.

Can confirm this 100%. I broke my wrist in a bike accident last year and couldn't code for 8 weeks. No income coming in but rent and bills still due. The disability insurance I had grumbled at paying for? Saved me from emptying my emergency fund.

Where exactly is this worksheet in TaxSlayer? I've been all through the Sale of Home screens and can't find any option to indicate partial business use that would trigger both forms.

The worksheet isn't immediately obvious. In the Sale of Home section, after you enter the basic information about the sale, look for a link called "Additional Information" or "Special Situations" (the exact wording varies by version). Click that and you'll find a question asking if any part of the home was used for business or rental purposes. When you answer "Yes" to that question, you'll get additional fields to enter the percentage of business use and the dates of business use. This is what tells TaxSlayer to split the reporting between Form 8949 and Form 4797. The software will then calculate the appropriate amounts for each form. Make sure you have the dates correct for when it was converted from personal to rental use, as this affects the basis calculations significantly.

The Practitioner Priority Line is great when you can actually get through! It's amazing how different tax software handles this situation differently. Some create a phantom entry on Schedule D that offsets the 4797 entry, others require manual adjustments. Did the IRS agent mention any specific form line references to make sure everything ties together correctly?

Can you explain what you mean by tax loss harvesting? I'm in a similar situation with about $8K in losses this year.

Tax loss harvesting means strategically selling investments that have declined in value to realize losses that can offset capital gains or up to $3,000 of ordinary income per year. Since you already have $8K in losses, you'll use $3K this year against ordinary income, then have $5K carrying forward. In future years, if you have investments that have appreciated significantly and you want to sell them, your carried-over losses will offset those gains, potentially reducing or eliminating the tax impact. Just be careful of the wash sale rule - don't buy substantially identical securities within 30 days before or after selling at a loss.

Learned this the hard way too. Does anyone know if turbotax carries this info forward correctly if you use them consecutive years?