How complicated was it to switch from partnership to S-Corp taxation? Did you have to create a new entity or just file some paperwork? Also, ballpark, how much did you save in taxes by making the switch?

The switch wasn't that complicated - just filed Form 8832 to be taxed as a corporation and then Form 2553 for the S-Corp election. Didn't need to create a new entity at all. The LLC remained the same, just the tax treatment changed. As for savings, it varies based on profit levels, but we probably saved around $15,000-$20,000 in self-employment taxes the first year after switching. The key is paying ourselves reasonable salaries (which are subject to FICA taxes) and taking the rest as distributions (which aren't). Just make sure you have a good accountant to help determine what's "reasonable" for your industry and area.

Nevada is way better for LLCs if you can establish a presence there. No state income tax and way lower fees. That's what my cousin did with his construction business after getting killed with California fees for years.

Lol I did the same thing when I first moved to Texas! But there are still 9 states with no income tax right? Florida, Texas, Washington, Alaska, Nevada, South Dakota, Wyoming, New Hampshire (only on dividends and interest), and Tennessee if I remember correctly.

You're right, there are 9 states with no income tax. Florida, Texas, Washington, Alaska, Nevada, South Dakota, Wyoming are fully income-tax free. Then New Hampshire only taxes investment income but not wages, and Tennessee phased out their tax on investment income so it's now completely income-tax free too. It's amazing how many people in these states still worry about state returns! The Direct File confusion is only relevant if you actually have to file a state return in the first place.

I had a similar situation last year with property in two states. Direct File isn't great for multi-state situations in my experience. It'll handle your federal return fine with the SSA-1099 and rental income, but for the Georgia state return, it gets complicated. When it transfers data to Georgia's system, it might not properly allocate which income is subject to Georgia tax vs what's exempt. I ended up using a paid preparer for this specific situation.

Do they need Form 8915-E as well? I thought that was required for CARES Act distributions.

Yes, you're absolutely right. They'll need to file Form 8915-E along with the 1040-X. This form is specifically for reporting coronavirus-related distributions and repayments. On Form 8915-E, they'll report the full distribution amount and any repayments they've made or plan to make. If they're eligible and want to spread the income over three years, they'd indicate that on this form as well, though as I mentioned, that might be complicated since the original distribution wasn't reported.

Tax advocates typically only help if you're experiencing significant hardship or if regular IRS channels have failed. For CARES Act questions, your best bet is to either connect directly with the IRS or use a tax professional who specializes in retirement distributions. Most CARES Act issues are pretty straightforward once you talk to someone who understands the rules.

What if I already filed my taxes but didn't include these losses? Can I file an amended return to claim them or would that increase my audit risk?

You can absolutely file an amended return to claim losses you forgot to include. Use Form 1040-X for the amendment along with a corrected Schedule D showing the capital losses. The general time limit for filing amendments to claim a refund is within 3 years from the date you filed your original return or within 2 years from when you paid the tax, whichever is later. As for audit risk, claiming legitimate losses you're entitled to shouldn't significantly increase your risk if you have the documentation to support them. Just make sure you keep records showing your basis in the shares and evidence of when they became worthless.

In TurboTax, you need to go to the Investments & Rental Properties section, then select Stocks, Mutual Funds, Bonds, Other. It will ask for the sale information and your cost basis. Make sure to enter your actual sales (even if pennies) rather than just marking it as worthless. It does track carryforward losses automatically for future years.

Isn't that technically tax fraud though? Even if it's a small amount? Not judging, just curious about the potential consequences.

Technically yes, but realistically the IRS operates on a threshold system even if they don't publicly admit it. The cost of pursuing someone for a few dollars in tax would far exceed what they'd collect. I'm not advocating tax evasion for significant amounts, but there's a practical reality to how tax enforcement works. The IRS themselves have had their resources cut for years and focus on larger discrepancies. That said, everyone should make their own decision based on their comfort level with risk - even if that risk is extremely minimal for amounts this small.

I used Cash App Taxes last year for my returns including some stock sales. It was completely free and handled Schedule D without issues. The interface isn't as polished as TurboTax, but for free you can't complain! It asks straightforward questions and walks you through everything. Definitely recommend for simple-to-moderate tax situations with some investment income.