Thanks for bringing this up! We are claiming the Child Tax Credit for both kids, but I'm not sure if we've maxed it out. My husband does get 1099s and I know he needs to do the quarterly payments but honestly we never knew how to calculate them properly. Is there a simple formula to figure out roughly how much we should set aside from each check?

A simple rule of thumb is to set aside about 25-30% of his 1099 income for taxes. This covers both income tax and self-employment tax (which is roughly 15.3% alone). For proper quarterly payments, you can use the IRS Form 1040-ES worksheet, which helps calculate your required payments based on expected income. The due dates are April 15, June 15, September 15, and January 15 of the following year. Setting up a separate savings account just for taxes can be really helpful - deposit that percentage from each check immediately before you're tempted to spend it.

This is great advice! I'm a contractor too and opened a SEP IRA last year. Was able to contribute almost 20% of my income and it dropped me into a lower tax bracket. Saved me thousands.

Just be aware that SEP IRAs have an earlier deadline than traditional IRAs! For 2024 taxes, you need to set up and contribute to a SEP IRA by the tax filing deadline (including extensions) in 2025. Don't wait until last minute like I did!

What app do you use to track your mileage? I've been using a paper logbook but it's getting to be a pain when I'm rushing between gigs.

I actually use a combination approach. I have MileIQ on my phone which automatically tracks all my drives, then I categorize them at the end of each week (business vs. personal). But I also keep some basic notes in my calendar for each gig with start/end odometer readings as backup documentation. The key is consistency - whatever system you choose, stick with it all year. The IRS gets suspicious when you have perfect documentation for part of the year and then nothing. Also, add notes about the business purpose - don't just mark "business trip" but actually note "Audio engineering for ClientName at VenueName" so it clearly ties to your 1099 income.

The 2025 rate hasn't been officially announced yet. The IRS typically announces the new rate in December for the following year. For 2024, it's $0.67/mile. The $0.82 mentioned above is just speculation - nobody knows the actual 2025 rate yet. If you're planning for 2025, I'd suggest using the 2024 rate for now and then adjusting when the official announcement comes out. The rate usually changes based on inflation and fuel costs, so it might go up, but probably not all the way to $0.82.

This is really helpful advice. I hadn't thought about documenting the strategy formally. Is there a specific format you'd recommend for this kind of business plan? Also, does the board approval need to happen annually or just once when implementing the strategy?

There's no required format, but I'd recommend including projected capital needs, specific growth milestones, timeline for expansion, and how the retained earnings will be used. Make it clear this is a temporary strategy until the business can support you full-time. Board approvals should definitely happen annually. At minimum, you should have annual minutes documenting review of the compensation strategy and business progress. Each year, note how the retained capital is being used toward your stated goals and reaffirm the strategy. This creates a pattern of consistent business purpose rather than looking like an afterthought if questioned.

YES! My brother-in-law got absolutely hammered for this exact situation. Ran his consulting S-corp for 2 years taking zero salary and only distributions. Got audited, and the IRS reclassified ALL his distributions as salary, meaning he owed back payroll taxes plus penalties and interest. Cost him over $30k when all was said and done. They specifically target S-corps for this issue because it's such a common tax avoidance strategy.

This is super helpful! Question - does amending returns from previous years increase audit risk for current/future returns? I just realized I probably missed some legitimate deductions last year.

Filing an amended return doesn't automatically trigger an audit, but it does involve additional review since someone has to process the amendment. If you're claiming additional substantial deductions that you missed, there's slightly more scrutiny than if you're just correcting a math error or adding a forgotten form. The key is having proper documentation for the deductions you're claiming. If they're legitimate business expenses you simply overlooked, and you have the records to back them up, then there's not much to worry about. The benefit of claiming deductions you're legally entitled to usually outweighs the small increase in review risk, especially if the amounts are significant.

Did you represent yourself during the audit or hire someone? I've heard horror stories about people trying to handle audits themselves.

Have you had any issues with Wave at tax time? I tried it last year and my accountant complained that the reports weren't detailed enough for some of the deductions we wanted to take. Did you add any paid features to make it work better?

I did have some limitations with Wave during my first tax season, particularly around categorizing certain business expenses properly. I ended up using their paid receipt scanning feature ($8/month) which helped tremendously with organization and made my accountant much happier. For detailed job costing and tracking profitability by service type, Wave definitely has limitations. I supplement with a simple spreadsheet for that analysis. The payroll integration with OnPay has been flawless though - all my quarterly filings have gone through without issues and the reports are accepted by my accountant without complaints.

I switched from QuickBooks to Xero last year for my pool service company (5 employees) and it's been excellent. The inventory tracking is better for tracking chemicals and supplies, and the mobile app is way more user-friendly for entering expenses on the go. Their project tracking feature works well for tracking costs by customer property too.

Thanks for sharing your experience! That's helpful to know about the mobile app and project tracking - both would be really useful for my lawn care business. How was the transition from QuickBooks? Did you lose any historical data in the switch?