I didn't realize I needed to check box 15! I'll take another look at the 1099-DIV for that code. So assuming it is code "R" as you mentioned, I would just reduce the basis from $8,115 to $7,270 on Form 8949, right? Is there anywhere else I need to note this adjustment?

Yes, that's exactly right. On Form 8949, you'll enter the original cost basis of $8,115 in column (e), then in column (g) you'll enter the adjustment amount of -$845 with code "B" which stands for "Basis adjustment." Then your adjusted basis in the calculation becomes $7,270. Make sure to check the right box at the top of Form 8949 for long-term transactions reported on a 1099-B with basis reported to the IRS. The form has clear instructions for these adjustments, and this way you're documenting exactly why your basis is different from what was reported to the IRS on the 1099-B.

Does FreeTaxUSA handle K-1 forms too? I've got some partnership interests and those forms are a nightmare to deal with manually.

But won't the employees get in trouble if they file with forms they know are wrong? My manager told us we HAD to wait for corrected W-2s.

No, employees won't get in trouble for filing with incorrect W-2s as long as they file an amendment once they receive the corrected forms. The IRS understands that errors happen with tax documents. Your manager is being overly cautious. While waiting for corrected W-2s is certainly the cleaner approach, the IRS allows taxpayers to file with the information they currently have and then correct it later through the amendment process. Just make sure you keep both the original and corrected W-2s for your records, and file the amendment (Form 1040-X) promptly once you receive the corrected form.

Did any of your employees get audited because of this? That's what I'm most worried about.

Would changing the payroll schedule that drastically cause problems with our employees? I'm thinking they might not like having their pay periods shifted around, especially around the holidays when cash is tight for many people.

It does require some careful communication with your team. We gave our employees about 3 months notice before implementing the change, and offered short-term advances to anyone who needed help with the transition. Most people adjusted within a month or two. It also doesn't have to be a permanent change - some businesses do a "bonus" mid-December payment that effectively prepays some January work, then return to normal scheduling in January. The key is getting those funds out of your business account before December 31st so they don't contribute to your year-end retained earnings.

C-Corp has double taxation though. They'd pay corporate taxes and then personal taxes on any dividends. With $9.5m ARR, seems like they'd end up paying more overall unless they plan to reinvest almost everything back into the business.

You're right about the double taxation concern. It works better for businesses planning significant reinvestment rather than regular profit distributions to owners. A possible middle ground might be the "hybrid approach" where they elect S-Corp taxation but establish a reasonable salary structure and timing that helps manage cash flow better throughout the year. They could also look into establishing separate entities for different business functions, though that adds complexity.

Good point - I'm in Minnesota. Does anyone know how MN handles capital gains taxes? Are they taxed differently than regular income at the state level?

Minnesota taxes capital gains as regular income, unlike the federal government which gives preferential rates to long-term gains. So you'll pay your normal Minnesota income tax rate on all your capital gains regardless of how long you held the investments. Minnesota's income tax rates range from 5.35% to 9.85% depending on your income bracket. Given your regular 22% federal bracket, you're probably looking at the middle Minnesota brackets (6.8% or 7.85%). There's no separate capital gains rate structure at the state level.

This is super important! Tax-loss harvesting saved me thousands last year. If you have any investments at a loss, you might want to sell those at the same time to offset some of your gains.

That's a great point about tax-loss harvesting. Just remember the IRS limits capital loss deductions against ordinary income to $3,000 per year. However, you can use capital losses to offset unlimited capital gains. Any unused losses can be carried forward to future tax years.

Thanks for mentioning this! I almost made that exact mistake. Do you know if tax software like TurboTax or H&R Block still offer access to prepare 2020 returns or am I stuck doing the paper forms at this point?

Most tax software still allows you to prepare 2020 returns, but you'll likely need to purchase their software rather than using their free online versions which typically only support the current tax year plus maybe one year back. TurboTax, H&R Block, and TaxAct all offer desktop or downloadable software for prior years. However, you'll still need to print and mail the return - electronic filing is generally not available for returns from 2020 at this point in 2024.

This is important! I messed this up on my late-filed return and it delayed my processing by months because the IRS had to manually review and adjust it.