Oh that's interesting! I do some gig delivery driving on weekends for extra cash. Does that count? How do I track mileage properly? Should I be keeping gas receipts too?

Yes, your gig delivery driving absolutely counts as business use! For tracking mileage, I recommend using an app like MileIQ or Everlance that automatically logs your trips. Start tracking immediately if you haven't been - better late than never. For tax purposes, you have two options: the standard mileage deduction (58.5 cents per mile for 2025) or actual expenses. Most people find the standard mileage rate easier and often more beneficial. If you go this route, you don't need gas receipts, but keep records of mileage, dates, and business purpose. If you choose actual expenses, then yes, keep all receipts for gas, maintenance, insurance, and loan interest. Either way, you can only deduct the business percentage of these expenses, so accurate mileage tracking is essential.

While I agree that the sales tax question only matters if you're itemizing, I think it's still worth answering correctly in case TurboTax determines itemizing would be better for you. The software compares both options, and a large purchase like a car with significant sales tax might tip the scales toward itemizing being more beneficial, especially if you have other potential deductions.

Did your accountant help create this compensation policy document or did you do it yourself? And do you adjust your salary annually or keep it the same year after year?

I created the basic framework myself using industry salary surveys, but my accountant reviewed it and suggested some improvements. The document included my job duties, required skills, hours worked weekly, and comparable salary ranges from multiple sources. I do adjust my salary annually, which the IRS actually views favorably. As your business grows or market rates change, your reasonable compensation should reflect that. In my case, I started at $180k and gradually increased it over several years as the business grew. The key is documenting the reason for any changes and ensuring they align with business performance and market rates.

I used Justworks for my S Corp when we hit about $750k revenue. They provided excellent compensation benchmarking data that helped justify my salary decisions. The added benefit was that their documentation carried weight with my tax preparer and potentially with the IRS since it came from a neutral third party.

Thanks for sharing your experience! Did you find that their benchmarking data recommended a higher or lower salary than what you initially thought was reasonable? I'm trying to gauge if they typically push for higher compensation (which might mean more payroll taxes) or if they provide balanced guidance.

Is there any advantage to using Section 195 vs just regular business expenses on Schedule C? Seems like either way the result is the same - deducting expenses in 2024 even with no income.

For smaller amounts like we're discussing here, there's typically no significant difference in outcome between claiming them as regular business expenses or Section 195 startup costs. Both approaches would allow deducting the expenses on your 2024 return. The main difference becomes relevant if you have startup costs exceeding $5,000, in which case Section 195 has specific rules about amortizing the excess. Also, Section 195 specifically addresses expenses incurred before your business began operating, while regular business expenses are for ongoing operations.

This is a really good point! The concept is called "continuity and regularity" - the IRS wants to see that you're pursuing the activity with continuity and regularity for profit rather than as a one-off.

Omg I didn't even think about state taxes! And honestly no, I didn't track my mileage at all... I had no idea I should have been doing that. Is there any way to estimate it now or am I just out of luck on that deduction?

You can reconstruct a mileage log after the fact, but you'll need some documentation to support it. Look through your delivery app history - most platforms keep records of deliveries you completed. You can use this to create a log showing dates, destinations, and estimated mileage. The IRS prefers contemporaneous records (tracked in real-time), but they do accept reconstructed logs if they're reasonable and backed by other evidence. You might not be able to claim every mile, but even a conservative estimate could save you significant money. Just be prepared to justify your calculations if asked.

I filed an amended return two years ago and didn't get audited. From what I understand, amended returns don't automatically trigger audits. The IRS is mostly concerned with whether you're making a good faith effort to correct mistakes.

Thanks for this insight. The discretionary nature is really appealing since her income can vary quite a bit. Do you know if there's a deadline for deciding whether to make a profit sharing contribution for the current tax year? Like could we wait until March 2025 to decide about 2024 contributions?

You can actually wait until your S Corp's tax filing deadline including extensions to make the profit sharing contribution for the prior year. So for 2024 contributions, if your S Corp files for an extension, you could have until September 15, 2025, to make the decision and the actual contribution. This flexibility is one of the biggest advantages of profit sharing plans for professionals with variable income. Just make sure the plan documents are amended before the end of the plan year in which you first want to make profit sharing contributions. The plan has to allow for profit sharing before you can actually make those contributions.

Not necessarily a compliance issue. In many medical groups, the LLC sponsors the 401k plan but the participating doctors are technically employed by their own S Corps. The plan documents just need to specifically allow for this arrangement. It's super common in group practices.