Whoa I had no idea about the 183 days thing! Is that calendar days or business days? And what counts as a "permanent place of abode"? Like if I'm renting a room would that count?

It's 184 calendar days (not just business days) - and partial days usually count as full days in NY. So if you cross into NY for lunch, that potentially counts as a full NY day. A "permanent place of abode" is usually any place you have regular access to that's suitable for year-round use - so yes, a rented room would typically count. It doesn't need to be owned by you or even paid for by you. If you have a key and regular access, it could qualify. NY is particularly aggressive about auditing people who claim to live elsewhere but work in NY. They've even been known to check your E-ZPass records, cell phone records, and credit card statements to verify your whereabouts! If you're close to that 183-day threshold, document everything.

Good point! This is why state-specific advice is so important. I'm in Illinois but work in Wisconsin, and they have a reciprocal agreement so I only pay IL taxes despite earning income in WI. Saves me from filing two state returns.

This is exactly what I was missing! So even though my Roth is 7 years old, if I converted some money from my Traditional IRA to the Roth only 2 years ago, I can't touch THAT money without penalties for another 3 years? But I could still withdraw my regular contributions anytime?

You've got it exactly right! Your regular contributions can come out anytime without taxes or penalties. And yes, that conversion from 2 years ago has its own 5-year clock - you'd need to wait 3 more years to withdraw those specific funds without the 10% penalty. The IRS treats withdrawals in a specific order: regular contributions come out first (always tax/penalty free), then converted amounts (in order of conversion date), and finally earnings. So you would need to withdraw all your regular contributions first before touching any converted amounts.

Yes! Qualified higher education expenses are one of the exceptions that waive the 10% early withdrawal penalty on Roth IRA earnings. But remember, you'll still owe income tax on those earnings if withdrawn before 59½ and before the account has been open 5 years. Eligible expenses include tuition, fees, books, supplies, and equipment required for enrollment at an eligible educational institution. Room and board also count if the student is at least half-time.

That's interesting about the S-Corp option. How difficult is it to change from partnership to S-Corp? Are there minimum salary requirements we would need to be aware of? Our LLC is still pretty small but we're planning for growth.

Converting from a partnership to an S-Corp isn't particularly difficult. You file Form 8832 to elect to be taxed as a corporation, then file Form 2553 to elect S-Corp status. It can be done any time, but if you want it effective for the current tax year, there are deadlines to be aware of. For salary requirements, the IRS expects S-Corp owners to take a "reasonable salary" based on market rates for the work you do. There's no specific minimum, but it needs to be defensible if questioned. Too low a salary raises red flags because it looks like you're trying to avoid payroll taxes. For a small business, even a modest salary that's in line with what you'd pay someone else for the same work should satisfy the requirement.

Good point about tax distributions! My partnership agreement actually requires minimum distributions equal to the highest tax bracket percentage of allocated income specifically for this reason. Helps prevent cash flow issues for partners at tax time.

Thanks for all the advice everyone! Quick question - if I put that extra amount on line 4(c), will that just reduce my paycheck by exactly that amount? Or does it calculate differently?

Exactly right - whatever dollar amount you put on line 4(c) will be withheld from each paycheck as an additional amount. So if you put $50, your paycheck will be $50 less each time, and that money goes straight toward your federal tax.

This is actually really smart. I never thought of doing a mid-year correction. Do you just submit a new W4 to your HR department?

Would that mean the grandfathering would apply to existing 401k balances or to existing participants? Like if i already have a 401k would all my future contributions be grandfathered or just the current balance?

Great question - typically grandfathering can be structured in different ways, but most commonly it would apply to existing balances as of a certain date, not to future contributions. So your existing 401k balance might be protected under the old rules, but new contributions after the law changes would fall under the new system. There's also sometimes a phase-in period where the changes are implemented gradually over several years to avoid sudden shocks to people's financial plans. Without seeing the actual legislation it's impossible to know exactly how it would be structured, but these types of accommodations are standard practice for major retirement tax changes.

I read something about this! The proposal might include income thresholds where the full impact only hits higher earners, with partial or no changes for lower/middle incomes. Would make sense if they're trying to keep the "no new taxes under 400k" promise.