I hadn't even thought about changing my business structure! Is that process complicated? And does it make record-keeping even more strict?

The process isn't too complicated - you file Form 2553 with the IRS to elect S-Corp status. The main thing is you need to start running payroll and paying yourself a reasonable salary, which means quarterly payroll tax returns. Record-keeping is more formal, yes. You'll need better separation between personal and business finances (which you should do anyway), and you'll have to file a separate tax return for the business (Form 1120-S) in addition to your personal return. Many people use a payroll service to handle the salary part. It's more paperwork for sure, but the tax savings can be significant because only your salary is subject to self-employment tax, not the full business profit.

This! I got hit with a $1,200 penalty my first year in business because nobody told me about quarterly payments. Such a painful lesson.

I've been making some payments but probably not enough. Is there a specific form I should be using for these quarterly payments?

Do you need any specific documentation to prove financial hardship? My rent and utilities already take up most of my paycheck, and with the garnishment I literally can't buy groceries.

You'll need documentation showing your income and necessary living expenses. Gather recent pay stubs, bank statements, utility bills, rent/mortgage statements, medical bills, and receipts for other essential expenses like groceries and transportation costs. Be thorough about documenting every necessary expense. The more comprehensive your documentation, the stronger your hardship case will be. For your specific situation about not being able to afford groceries, make sure to calculate your basic food needs as part of your essential expenses. The Taxpayer Advocate can put a rush on your case if you're facing immediate hardship like potential eviction or inability to purchase necessities.

This happened to me too! IRS had my old address from 3 years ago. I moved twice and the notices never got forwarded. By the time I realized what was happening, they'd already been garnishing for 2 months.

Yes, the principle is exactly the same with crypto gambling. The IRS treats cryptocurrency as property, not currency, but the issue of duplicate reporting is handled the same way. You'll report your gambling winnings from the W2-G, and you'll need documentation to show that the crypto transactions reported on your Coinbase 1099 represent the same funds. Be aware that you might also have capital gains or losses from any change in the crypto value between receiving it as winnings and transferring it to Coinbase.

Thanks for this advice! I just started a spreadsheet to track everything. Do you know if there's a specific format the IRS prefers for gambling logs? And how detailed do the session records need to be?

The IRS doesn't require a specific format for gambling logs as long as they contain complete and accurate information. The more detailed, the better in case of an audit. For session details, I include start/end times, specific games played, and bet amounts. For poker, I track each tournament separately. For sports betting, I note the specific games/events. I also save all receipts, tickets, and confirmation emails. The key is being able to match your documented activity with the amounts reported on your tax forms.

She signed last week, unfortunately. The settlement does break down some amounts but it's pretty general - just "compensation for vehicle" and "additional damages." I'll let her know to get it reviewed by a tax pro before filing next year. Thanks for this info!

I haven't personally, but a client of mine did. The IRS was primarily concerned with verification of the original purchase price (cost basis) that was deducted from the settlement. Make sure you have documentation showing what was paid for the vehicle originally - purchase agreement, financing documents, etc. They also looked at how attorney fees were handled. If you received a 1099 for the full settlement amount (including what went to your attorney), make sure you properly deducted those fees. Most IRS review letters are just verification requests rather than full audits. Provide the documentation they're asking for, and you should be fine assuming you reported everything correctly.

Thanks for the heads up on payroll providers! Any specific ones you'd recommend for someone in my situation? Also, did you set up a separate retirement plan when you made the switch?

I've heard good things about Gusto and OnPay from other single-member S-Corps. They're more modern and user-friendly than what I ended up with. A local bookkeeper who specializes in small businesses could also be a good option - sometimes they offer payroll services bundled with bookkeeping. For retirement plans, that's actually one of the big advantages of an S-Corp. I set up a Solo 401(k) which lets me contribute both as the employer and employee. You can potentially put away much more than you could with just an IRA or SEP. With your income level, you should definitely look into this as it can significantly reduce your tax bill beyond just the SE tax savings.

This is so confusing. My tax person told me to just pay health insurance personally and take the deduction. Is that wrong?