Thanks, that's helpful! Do you actually submit that insolvency worksheet with your tax return or just keep it for your records? And how detailed do you have to be with listing personal property? Like do I need to estimate the value of my couch and TV separately or just put "household goods: $X amount"?

You don't submit the worksheet with your return - it's just for your own records and in case of an audit. But definitely complete it thoroughly and keep it with your tax documents. For personal property, you don't have to be extremely detailed for each individual item. Grouping them makes sense - "household furnishings: $2,000" or "electronics: $1,500" is fine. Just make reasonable estimates of what you could actually sell these items for (garage sale or Craigslist values), not what you paid for them. And yes, definitely include vehicles, jewelry, tools, anything with value. For retirement accounts, only include what you could actually access (minus penalties) if you had to liquidate them at that time.

Yes, forgiven credit card debt generally counts as cancelled debt and the credit card company should have issued you a 1099-C if it was over $600. If you didn't receive one, they might not have filed it, or it could have been lost in the mail. You're technically supposed to report it as income even without the 1099-C, but you can still claim the insolvency exclusion on Form 982 if you qualify. I'd recommend checking with the debt settlement company to see if a 1099-C was issued. You can also create an account on the IRS website to view all forms that were filed under your SSN.

That's a great point that I hadn't considered. We did have some capital gains last year from selling some stocks (about $35,000). Would that really affect the QBID calculation that much? I didn't realize capital gains would impact this.

Yes, capital gains definitely impact the calculation! The 199A deduction is limited to 20% of your taxable income MINUS net capital gains. So in your case, if you had $35,000 in capital gains, your effective taxable income for QBID purposes would be reduced by that amount. For example, if your taxable income was $200,000 including $35,000 capital gains, your QBID would be limited to 20% of $165,000 ($200,000 - $35,000), which is $33,000. Even if your QBI was higher, you couldn't take more than that $33,000 as your QBID. This is a commonly overlooked limitation that can significantly reduce the expected deduction.

TurboTax handles QBID calculations much better than FreeTaxUSA in my experience, especially with multiple K1s. It costs more but worth it for complex situations with partnerships and S-corps.

8 What's considered a "reasonable salary" exactly? I've heard different things - some say 50% of profits, others say market rate for your position. I'm also wondering about the payroll part, do you use a service for that or DIY?

5 The "reasonable salary" requirement is probably the trickiest part of S Corp compliance. There's no fixed percentage or formula - the IRS evaluates it case by case. The most defensible approach is researching what similar positions earn in your industry and location. BLS.gov has salary data that can help document your reasoning. I absolutely recommend using a payroll service rather than DIY. I tried handling it myself initially and it was a nightmare keeping up with all the filing requirements and deadlines. I now use Gusto which costs about $45/month but handles all the calculations, filings, and direct deposits automatically. The peace of mind is worth every penny, especially since penalties for incorrect payroll tax filings can be steep.

16 Interesting point about the short tax year filing. Would that mean two separate state filings as well? And what about quarterly estimated tax payments - would those need to be recalculated mid-year?

Thanks for this tip. I went back and checked all my numbers again and noticed I accidentally entered my student loan interest as $45,000 instead of $4,500. That was part of the problem! Still working through the rest of the issues, but every bit helps.

Glad you caught that! Student loan interest is an easy place to make a mistake since there's a cap on how much you can deduct anyway (I think it's $2,500 max for 2024). Another thing to check is filing status - if you accidentally selected "Married Filing Separately" instead of "Single" it can sometimes cause weird tax calculations. Also verify your state residency information is correct if you're filing state taxes too.

I've used both and definitely prefer FreeTaxUSA. TurboTax seems designed to upsell you on premium features while FreeTaxUSA just lets you file without all the marketing. Plus it's WAY cheaper.

Does anyone know if you can use dependent care FSA for summer camp? My kids are school age but need supervision during summer months. Would that qualify as a dependent care expense?

Yes, summer day camps generally qualify as eligible dependent care expenses for FSA purposes! This includes general day camps, as well as specialized camps focusing on sports, arts, or academics. The key requirement is that the camp enables you to work or look for work. Overnight camps do NOT qualify though, as they're considered primarily for entertainment rather than care. Also, kindergarten and higher education costs aren't eligible, as they're considered educational rather than care expenses.

Thx for the clear explanation! So if I'm in the 24% bracket plus 7% state tax, am I saving 31% by using the dependent care FSA? Or is there more to it?