Does the timing of salary changes matter? Like if I start with $60k in January but business is booming by June, should I give myself a mid-year raise or wait until the following year?

Yes, you can absolutely give yourself a mid-year raise if circumstances warrant it. Many S-Corp owners adjust their salaries as the year progresses and business performance becomes clearer. Just document your reasoning thoroughly - note the increased business performance, expanded responsibilities, or whatever factors led to the adjustment. What the IRS doesn't like to see is erratic salary patterns that appear to be manipulating payroll taxes rather than reflecting actual changes in the business. For example, artificially keeping salary low all year then taking a massive "bonus" in December looks suspicious. A clean mid-year adjustment with clear business justification is perfectly acceptable.

Is that 1/3 of profit BEFORE or AFTER your salary is deducted? Because that makes a huge difference in the calculation.

Our daughter lives with me about 70% of the time, and I'm the custodial parent according to our divorce decree. My ex was supposed to claim her last year because we verbally agreed to alternate years, but apparently he never did. We don't have anything formal like Form 8332 filed. Does that mean I should definitely file the amendment then?

Yes, you should definitely file the amendment. Since you're the custodial parent with the child living with you 70% of the time, and you didn't sign Form 8332 to release the claim, you have the legal right to claim your daughter as a dependent. Without Form 8332, a non-custodial parent cannot claim the child regardless of verbal agreements. The IRS follows the documentation, not verbal agreements between parents. You're potentially leaving significant money on the table by not claiming her, especially with the expanded Child Tax Credit.

I used TurboTax to amend my return last year when I forgot to claim my son's college expenses. It was surprisingly easy - you just start an amended return and it walks you through what you want to change. For something like adding a dependent, it should recalculate everything including any credits you might be eligible for.

Do they handle multi-state employees? I have people working remotely from different states now and it's becoming a nightmare with my current system.

Thanks for sharing your experience! It's reassuring to hear from someone using it long-term. Does it handle tip reporting well? That's something we need to manage for our groomers. OnPay does handle multi-state employees really well according to their website. My brother mentioned they actually specialize in that since they work with a lot of construction companies that cross state lines. You can apparently set up unlimited state tax accounts without extra fees.

Oh man, I feel this comment in my SOUL. Did the same thing with my first business and ended up with a similar mess. Tax agencies have zero sense of humor about payroll mistakes.

That's exactly what I'm trying to avoid! I've been doing contract-only up until now, but as we're growing I'm bringing on more permanent staff. Did you end up with a software solution you liked after your spreadsheet disaster?

Can 529 plans only be used for college? My kids might want to do trade school or something non-traditional. Would a different savings vehicle be better in that case?

Great question! 529 plans have actually become much more flexible in recent years. They can be used for a wide range of education options beyond traditional four-year colleges, including vocational schools, trade programs, technical schools, and even apprenticeship programs registered with the Department of Labor. If you're still concerned about flexibility, another option to consider is a Coverdell Education Savings Account, which allows for more diverse qualified expenses including K-12 costs. However, Coverdells have much lower contribution limits ($2,000 annually) and income restrictions that 529s don't have. Some families also use UGMA/UTMA accounts which have no education restriction but do transfer to the child's control at age of majority (18-21 depending on state), and they don't have the tax advantages of education-specific accounts.

Kiddie tax typically doesn't apply to 529 plans since the earnings grow tax-free and aren't taxed when withdrawn for qualified education expenses. Are you thinking of UGMA/UTMA accounts maybe?

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.