Thanks for this info! I did file Form 1120-S for 2021 and issued myself W-2s, so sounds like I've been operating consistent with S-corp status. I was just confused about whether I could put January 1 as the effective date when my LLC wasn't technically formed until March. I'll definitely check Box D1 and explain the situation in Part III as you suggested. Do you think I should attach anything else to the form when I send it in? Like copies of my 2021 tax filings to prove I've been operating as an S-corp?

Yes, you should absolutely attach copies of your 2021 Form 1120-S and any W-2s you issued yourself as supporting documentation. This demonstrates to the IRS that you've been operating consistently as an S-corporation. Also consider attaching a brief cover letter referencing the IRS notice you received and explaining your intention to address this with the late-filed election. I'd also recommend sending it certified mail so you have proof of submission. The IRS can be slow to process these, so having documentation of when you submitted everything can be important if they follow up again before processing your election.

Good point! I made this mistake last year and they rejected my filing, adding another 2 months to the process. You can download the current version directly from irs.gov rather than using any forms that might be outdated on tax preparation websites.

Thanks for the solid advice! For the quarterly taxes, is it just a flat 30% of income or does it vary based on what expenses I've had that quarter? Also, do most banks offer business accounts to sole proprietors or do I need an LLC first?

The quarterly tax amounts should ideally be based on your actual profit for that quarter (income minus expenses), but many contractors use a simplified approach of setting aside a percentage of gross income to make it more manageable. The 30% is just a rule of thumb - your actual percentage might be higher or lower depending on your state tax situation and deductions. Most banks absolutely offer business accounts to sole proprietors - you don't need an LLC first. You'll typically need your Social Security number and possibly a DBA ("doing business as") registration if you're operating under a business name that's not your personal name. I'd recommend shopping around as some banks offer free business checking while others charge monthly fees.

Can confirm this 100%. I broke my wrist in a bike accident last year and couldn't code for 8 weeks. No income coming in but rent and bills still due. The disability insurance I had grumbled at paying for? Saved me from emptying my emergency fund.

Can you explain what you mean by tax loss harvesting? I'm in a similar situation with about $8K in losses this year.

Tax loss harvesting means strategically selling investments that have declined in value to realize losses that can offset capital gains or up to $3,000 of ordinary income per year. Since you already have $8K in losses, you'll use $3K this year against ordinary income, then have $5K carrying forward. In future years, if you have investments that have appreciated significantly and you want to sell them, your carried-over losses will offset those gains, potentially reducing or eliminating the tax impact. Just be careful of the wash sale rule - don't buy substantially identical securities within 30 days before or after selling at a loss.

Learned this the hard way too. Does anyone know if turbotax carries this info forward correctly if you use them consecutive years?

22 I use it every year for my seasonal business. It's definitely more work but WORTH IT if your income is lumpy. Instead of being required to pay equal amounts each quarter, you calculate based on what you've actually earned by the end of each quarter. My Q1 and Q2 payments are tiny, then Q3 and Q4 are massive when we hit our busy season. Your accountant is right that it's complicated though. You basically have to do a mini tax return for each quarter. I wouldn't try it without professional help the first time.

That's a really good point about spreading it out. I think I'll do the 5 paycheck option since that would be way less disruptive to my monthly budget. Do you think I need to specifically ask HR about the state tax withholding or would they typically handle both?

Definitely ask HR specifically about state taxes. In my experience, some payroll systems don't automatically adjust state withholdings when federal is increased. Just tell them you want to make sure both federal AND state taxes are being withheld appropriately for the HRA payment. They should be able to handle that for you.

I don't think that's accurate. The taxes you pay are based on the tax year they're for, not when you pay them. So taxes for 2023 income always count toward 2023 SALT deduction regardless of when you actually pay them.