Be VERY careful with ERTC claims right now. My manufacturing business filed legitimately for both 2020 and 2021 last year with solid documentation. We got our 2020 refund after about 6 months, but we just received a compliance check letter requesting additional documentation for our 2021 claim. Our CPA said the IRS is auditing a much higher percentage of these claims than normal due to all the fraud. Having accurate quarterly revenue comparisons properly documented seems to be critical. They specifically requested: - Detailed calculation methodology - Proof of paid qualified wages - Government orders affecting operations - Quarter-by-quarter revenue documentation If you're going to file for 2020, just make sure you have absolutely rock-solid documentation for everything.

I'm dealing with the exact same situation - we claimed 2021 but not 2020, and now I'm terrified we're leaving money on the table. Has anyone actually calculated whether the potential interest and penalties for an incorrect 2021 claim would outweigh the legitimate 2020 claim amount?

I actually did exactly what you're considering about 3 years ago with our rental business. We switched from taking mostly W2 to a smaller salary with quarterly distributions. BIG MISTAKE. We got audited the following year, and the IRS determined our W2 salaries were unreasonably low compared to our responsibilities and distributions. They reclassified about 70% of our distributions as wages subject to employment taxes, plus penalties and interest. Our tax bill ended up being much higher than if we'd just maintained appropriate W2 compensation in the first place. Don't get greedy trying to avoid FICA taxes - the IRS has seen every trick in the book with rental businesses.

Has anyone considered the potential impact on mortgages and loans when switching from W2 to distributions? I made this switch with my property management company and then tried to refinance my primary residence. The bank gave me a MUCH harder time qualifying with distribution income versus W2 income. They wanted 2 years of tax returns showing consistent distributions and still counted it as less reliable than employment income. Just something to consider if you're planning to apply for any financing in the next couple years!

One thing I haven't seen mentioned - make sure you understand the difference between your RSUs vesting and any selling that might have happened automatically. Many companies have a "sell-to-cover" arrangement where they automatically sell a portion of your vested shares to cover tax withholding. Look at your brokerage statements from when the RSUs vested. It might show that, say, 35% of the shares were sold immediately for tax withholding. If that's the case, your employer should have already withheld taxes on the full $300k value, but you'd only have the remaining 65% of shares in your account.

Not sure if this helps but you can actually see if your employer withheld taxes properly by looking at Box 2 of your W2 (Federal income tax withheld). If they included the $300k RSUs in Box 1 (Wages) but didn't withhold enough taxes on them, that's why you're seeing a large tax bill now. Unfortunately, you can't override the W2 income amount in TurboTax because that's what's reported to the IRS. The W2 is correct in including the RSUs as income. Your only options are: 1. Pay the tax you owe on that income now 2. Set up an IRS payment plan if you can't pay it all at once 3. If you believe the W2 is actually incorrect (not just inconvenient), contact your employer for a corrected W2

Has anyone considered restructuring the debt itself rather than just eliminating the interest? Maybe the sons could contribute the note to a family limited partnership and then distribute partnership interests in a way that achieves their objectives? Or possibly convert the debt to preferred equity with specific dividend rights?

Just want to point out that whatever route you take, make sure it has legitimate business purpose beyond just tax savings. The IRS can recharacterize transactions that appear to be solely tax-motivated. Document any legitimate non-tax reasons for the restructuring (e.g., improving company cash flow, facilitating business expansion plans, addressing changing family circumstances).

Make sure to send your response via certified mail or some international equivalent that gives you tracking and delivery confirmation! I had a similar situation and the IRS later claimed they never received my response. Without proof of delivery, I had to go through the whole process again.

Just want to point out - since you already PAID your taxes, this is mostly a paperwork issue and not something to panic about. The IRS cares most about getting their money, which they already have. I had a similar situation (though domestic) and just sent in the signed form with a brief explanation. Never heard anything else about it. They just needed to check the box that they had my signature.