Is there any advantage to them putting themselves on actual payroll instead of just taking draws? I've heard something about S-corps saving on self-employment taxes but I'm fuzzy on the details.

There can be significant tax advantages to electing S-corporation status and putting yourself on payroll, but it comes with more complexity and costs. With an S-corp, you can pay yourself a "reasonable salary" subject to employment taxes, then take additional money as distributions that aren't subject to self-employment tax. This can save thousands in self-employment taxes depending on your profit level, but you'll have additional costs: payroll processing, employment tax filings (including Forms 940 and 941), workers' comp insurance, and additional accounting complexity. Generally, businesses making $40,000+ in profit might benefit from this structure, but it's very situation-dependent and requires professional guidance to do correctly.

Thanks for the practical advice! We're definitely keeping track of all our expenses. Is there anything specific to the cleaning business that people commonly miss as legitimate deductions? We're currently using our personal cars to get to jobs.

OP literally said they started the job in May. Reading comprehension ftw. That's obviously why the W2 shows less than the full salary amount.

You're right, I completely missed that part about starting in May. That perfectly explains the difference between the 62k salary and 55k on the W2 - it's just the prorated amount for the partial year worked.

That's actually a really good point I hadn't considered. I'll reach out to our HR department to verify they're using the current W4 calculation method. They're a fairly small company so it's possible they're using outdated processes. That could definitely explain the discrepancy. I'm realizing from all these comments that I probably did get the child tax credit benefit, just in my paychecks rather than as a lump sum at tax time. I think I need to decide whether I want more money throughout the year or a bigger refund, then adjust my W4 accordingly.

I had this exact issue with my company last year! They were using outdated software that wasn't correctly applying the Child Tax Credit on the new W4 form. Took them 3 months to fix it but they eventually had to give me back pay.

What exactly should I be writing down? Just the total amount or do I need to break it down by credit card vs cash tips?

Ideally you should record both your cash and credit card tips separately for each shift. Credit card tips are already tracked by the restaurant's system, but having your own record helps you verify everything's correct. For cash, just the total amount per shift is fine - you don't need to track each individual transaction. Also record the date, which shift you worked (lunch/dinner), and your total sales if possible. This helps establish the reasonableness of your reported tips if there's ever a question. Many servers use tip tracking apps now that make this super simple - just a quick entry at the end of each shift.

This is so true. I'm in New York and the state department of taxation came after me even though I'd settled things with the IRS. They have their own penalty structures too.

Thanks! Do you know if they have a "review" feature that checks for potential mistakes or missed deductions before filing? That's one thing I did like about TurboTax.

Yes, they absolutely have a review feature! It runs through everything before you file and flags potential issues or missed opportunities. It's actually pretty thorough - last year it caught that I hadn't entered a 1099-INT from a small savings account I had forgotten about. They also have a "maximize refund" pledge similar to other tax services, so they're incentivized to help you find all eligible deductions and credits.

Can confirm this limitation. I tried using it when I moved mid-year between states and it was confusing. Ended up using a different service for that year, but went back to FreeTaxUSA the next year when my situation was simpler.

Thanks for this straightforward advice! Do you have to attach any special forms or documentation when you write "NRA" for your spouse? I'm worried about my return getting flagged for review if I just write that in.

No special forms needed when filing separately with an NRA spouse! The IRS is completely familiar with this situation. Just write "NRA" in the space for the SSN and proceed normally. I've been doing it for 7 years and never had a return flagged or questioned. The only time you need additional forms is if you're claiming your spouse as a dependent (which you generally can't), filing jointly (which requires an ITIN and a special election), or if your spouse had US income. For a simple MFS with an NRA spouse with no US ties, it's very straightforward.

This is really important advice! My friend got stuck with a huge tax bill because her estranged husband in Germany had unreported income when they filed jointly. The IRS came after her even though she had no idea about his finances!