Thanks for bringing this up! I didn't even think about the Additional Medicare Tax. My combined income from the three jobs will definitely put me over the threshold, but each individual job is under $200k. Will employers automatically start withholding the additional 0.9% once my income at that specific job hits $200k, or do I need to request additional withholding?

Your employer is only required to withhold the Additional Medicare Tax when your wages from that specific employer exceed $200,000. If no single employer pays you more than $200,000, but your combined income exceeds the threshold, none of your employers will withhold this tax automatically. You have two options in this situation: either increase your regular withholding by submitting a new W-4 to one or more employers requesting additional withholding, or make quarterly estimated tax payments to cover the expected Additional Medicare Tax. Either way, you'll need to calculate approximately how much additional tax you'll owe based on how much your combined income will exceed the threshold.

You've got it exactly right. I'm a bookkeeper for several small businesses, and I can confirm the employer portion is never refunded, even in multiple-job situations. It's one of those quirks in the tax code that most people never encounter.

I like this approach! For the quarterly reviews, are you finding that classifications change over time? For example, does new development eventually become maintenance in subsequent quarters?

Yes, we've definitely seen that transition from new development to maintenance over time. As features mature, work on them tends to shift from primarily new development to mostly maintenance and refinement. We actually created a simple lifecycle model where new features start as 100% development, then after initial release they transition to a mixed classification, and finally to predominantly maintenance after they've been in production for a certain period. The exact timing varies by feature complexity, but having this framework helps us be more consistent in our classifications over time.

This is actually a nuanced question. Open source contributions can potentially qualify as R&E if they're related to your business and provide some benefit to your company's products or services. The key is whether these contributions represent research or experimentation that might lead to development of new products or improvements to existing ones.

Thanks for this perspective! Since I'm planning to sell soon, adding it to the basis makes the most sense for me. Do I need any special documentation beyond the receipt and my communication with the builder to prove this should be part of my basis?

You'll want to keep the inspection report, receipt, and any communication with the builder or HOA that shows the inspection was necessary due to building defects. Also document that other units had confirmed mold issues, as this strengthens your case that the inspection was a necessary expense related to your property. For your basis calculation, maintain a file with all improvement costs, including this inspection. When you sell, you'll use IRS Form 8949 and Schedule D to report the sale, where your adjusted basis will offset the sale proceeds to determine your gain or loss.

This is exactly what I did when I had water damage in my apartment! The landlord paid the testing company directly and it saved me from dealing with any tax headaches. Definitely the cleanest solution if the builder is willing to do it.

Is there some calculator you can use to figure out the right withholding amount? I always struggle with this and either get a huge refund or end up owing.

Yes, the IRS has a Tax Withholding Estimator on their website that's pretty accurate. Just google "IRS withholding calculator" and it should be the first result. You'll need your most recent pay stub and tax return handy when you use it. The calculator will tell you exactly how to fill out your W-4 based on your specific situation. It even lets you adjust whether you want a bigger refund or more money in each paycheck. I use it every time I get a raise or my life circumstances change, and it's kept my tax bill/refund pretty balanced.

Exactly this. I work in payroll and see this all the time. Payroll systems calculate withholding based on the assumption that each check is what you'll make all year. So if you get a raise midyear, the system doesn't know about your previous lower income months and doesn't withhold enough.

That's a great point about midyear raises. The payroll system treats each check as if you've been making that amount all year, which can lead to significant underwithholding. This is especially true for bonuses or people who get promoted partway through the tax year.

That's a really good point I hadn't considered. My first LLC does own the building where we operate. Would the self-rental rules apply even after the restructuring since I'd still be the ultimate owner through the second LLC?

Yes, the self-rental rules would still apply even after restructuring. The IRS looks at the ultimate ownership when determining whether these rules kick in. Since you'd still be the ultimate owner of both entities (you own the second LLC which owns the first LLC), any rental payments between them would be subject to scrutiny. The main thing to be aware of is that rental income in this situation is typically treated as non-passive, regardless of your level of participation. This means you can't use these rental losses to offset other passive income. It can significantly impact your tax planning if you were counting on those losses.

What ratio did you end up using between salary and distributions that the IRS was ok with? I've heard everything from 50/50 to 70/30 but never from someone who actually went through an IRS review.