Not a dumb question at all. S-corps can save you a ton on self-employment taxes once you're making decent money. With OP's income ($242,500 net), the savings on Medicare and Social Security taxes alone are significant. If they were a straight LLC/sole prop, they'd pay 15.3% SE tax on almost everything. As an S-corp, they only pay FICA taxes on their "reasonable salary" ($95,000) and the rest ($147,500) is only subject to income tax, not SE tax. That's a savings of about $22,500 in SE taxes! The headaches are worth it at that income level.

Great question! For engineering consultants, I'd recommend using multiple sources to build a solid documentation package. The Bureau of Labor Statistics (BLS) Occupational Employment Statistics is the gold standard - look up "Engineering Services" industry data for your specific engineering discipline and geographic area. Robert Half and other major recruiting firms publish annual salary guides that are widely respected. Professional engineering societies like NSPE (National Society of Professional Engineers) often have salary surveys specific to consulting work. PayScale, Glassdoor, and Salary.com can provide additional data points, though the IRS tends to prefer more formal sources. The key is showing you researched what a W-2 employee doing similar work would earn, then documented your methodology. Also consider factors like years of experience, certifications, geographic location, and specialty area. Keep all your research in a file - print the web pages, save PDFs with dates, and write a brief memo explaining your reasoning. This shows good faith effort if the IRS ever questions your salary level.

Great question! For engineering consultant salary documentation, I'd recommend using multiple sources to build a solid case. The Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics is the gold standard - it's government data that the IRS respects. Look up "Engineering Services" (NAICS 541330) for your specific location. Also check out salary surveys from professional organizations like the National Society of Professional Engineers (NSPE) or the American Society of Civil Engineers (ASCE) if applicable to your field. PayScale, Glassdoor, and Salary.com can provide additional market data, especially if you filter by experience level and location. The key is showing you paid yourself what a similar employee would earn doing the same work. Document factors like your years of experience, specialized skills, education, and regional market rates. I'd also keep records of any employee benefits you're NOT getting (health insurance, vacation pay, etc.) since that can sometimes justify a slightly lower base salary. The IRS tends to look for salaries that are at least 40-60% of net income for service businesses, but the real test is "what would you pay someone else to do this work?" Having multiple data sources showing market rates in that range gives you solid ground to stand on.

I think you're confusing systems. FIRE requires you to apply for a Transmitter Control Code and is more complex. For smaller businesses, the IRS offers the "IRIS" system (Income Reporting Information System) which is more user-friendly for filing small batches of 1099s.

Thanks for the correction! You're absolutely right - I mixed up the systems. IRIS is definitely the better option for smaller businesses. The application process is much simpler and you don't need all the technical requirements that FIRE has. For someone like the original poster who just needs to file a handful of 1099-NECs, IRIS would be perfect and completely free through the IRS.

This is exactly the answer I was looking for! Thank you so much for the clear explanation. I had no idea I could just print the official forms from the IRS website on regular paper. That saves me from having to order new forms and I can finally put those 2022 forms to good use as scratch paper like you suggested. Just to double-check - when you say "Copy A" for the IRS filing, that's different from the copies I send to my contractors, right? I want to make sure I'm downloading the right versions for each purpose.

7 That's a really good point! Do different states have different rules for teenagers filing? I'm in California if that matters.

Yes, California does have different rules! For 2024 taxes, California requires filing if you made over $4,803 as a dependent, which is much lower than the federal threshold. Since you made $2,300, you're still under California's requirement too. But like with federal taxes, if California withheld any state income tax from your paychecks (check box 17 on your W-2), you should file to get that money back. California also has free filing options for simple returns like yours.

For free tax software, I'd definitely recommend starting with the IRS Free File program (irs.gov/freefile) - it partners with legitimate tax companies to offer free filing for people who qualify. Since your income is under $79,000, you'll have several good options to choose from. I personally used TurboTax Free Edition for my first filing and found it really user-friendly - it asks questions in plain English and walks you through each step. H&R Block Free Online is another solid choice that's great for beginners. The nice thing about these free versions is they'll import your W-2 information directly if you have a digital copy, or you can just type in the numbers from each box. They'll automatically calculate whether you need to file and how much refund you might get. Just make sure you're using the actual free versions and not accidentally getting upsold to paid features you don't need!

For free tax software, I'd definitely recommend starting with the IRS Free File program - it's official and completely free for people with simple tax situations like yours. TurboTax Free Edition and H&R Block Free are both good options available through that program. They'll walk you through everything step by step with questions in plain English, and they're designed specifically for situations like yours with just a W-2. Plus they'll automatically check if you qualify for any refunds. The whole process is pretty much just answering yes/no questions and typing in the numbers from your W-2. Super straightforward for a first-timer!

PMI deduction expired after 2021 I believe. They keep threatening to bring it back but nothing yet. It's annoying because I'm paying $180/month for PMI that used to at least give me a tax break!

You're right, unfortunately it hasn't been renewed. I just double-checked and the PMI deduction expired after 2021 tax year. Really hurts those of us who couldn't put 20% down. I was chatting with my lender last week about doing a reappraisal since home values in my area have gone up, which might get me over that 20% equity threshold and eliminate the PMI altogether. Might be worth looking into if you've been in your home a while or values have increased in your area.

But isn't home office deduction only for self-employed people? I work remotely for a company and my tax person said employees can't deduct home office anymore after the Trump tax changes.

You're absolutely right Katherine. The Tax Cuts and Jobs Act eliminated the home office deduction for employees starting in 2018. Only self-employed individuals, independent contractors, and business owners can still claim home office expenses. If you're a W-2 employee working from home, you can't deduct those expenses even if your employer requires you to work remotely. It's one of those frustrating changes that hit a lot of people who started working from home during the pandemic. The only exception would be if you're also doing freelance/contract work on the side from that same home office space.

same here bestie... we're all clowns waiting on the IRS 🤡