Can 529 plans only be used for college? My kids might want to do trade school or something non-traditional. Would a different savings vehicle be better in that case?

Great question! 529 plans have actually become much more flexible in recent years. They can be used for a wide range of education options beyond traditional four-year colleges, including vocational schools, trade programs, technical schools, and even apprenticeship programs registered with the Department of Labor. If you're still concerned about flexibility, another option to consider is a Coverdell Education Savings Account, which allows for more diverse qualified expenses including K-12 costs. However, Coverdells have much lower contribution limits ($2,000 annually) and income restrictions that 529s don't have. Some families also use UGMA/UTMA accounts which have no education restriction but do transfer to the child's control at age of majority (18-21 depending on state), and they don't have the tax advantages of education-specific accounts.

Kiddie tax typically doesn't apply to 529 plans since the earnings grow tax-free and aren't taxed when withdrawn for qualified education expenses. Are you thinking of UGMA/UTMA accounts maybe?

Is there any advantage to them putting themselves on actual payroll instead of just taking draws? I've heard something about S-corps saving on self-employment taxes but I'm fuzzy on the details.

There can be significant tax advantages to electing S-corporation status and putting yourself on payroll, but it comes with more complexity and costs. With an S-corp, you can pay yourself a "reasonable salary" subject to employment taxes, then take additional money as distributions that aren't subject to self-employment tax. This can save thousands in self-employment taxes depending on your profit level, but you'll have additional costs: payroll processing, employment tax filings (including Forms 940 and 941), workers' comp insurance, and additional accounting complexity. Generally, businesses making $40,000+ in profit might benefit from this structure, but it's very situation-dependent and requires professional guidance to do correctly.

Thanks for the practical advice! We're definitely keeping track of all our expenses. Is there anything specific to the cleaning business that people commonly miss as legitimate deductions? We're currently using our personal cars to get to jobs.

This is exactly what I'm afraid of. Did you try calling the IRS beforehand to discuss settlement options, or did you go straight to representing yourself in court?

I tried calling the IRS multiple times but could never get through to anyone helpful. I just got transferred around and eventually disconnected. That's part of why I decided to fight it in court. Looking back, I should have been more persistent about reaching someone at the IRS who could discuss my case before the court date. Many cases get settled before court through their appeals process if you can actually reach the right person.

This is great advice! Do you need to qualify based on income to use these services? And how did you find them - did you just call the law school directly?

OP literally said they started the job in May. Reading comprehension ftw. That's obviously why the W2 shows less than the full salary amount.

You're right, I completely missed that part about starting in May. That perfectly explains the difference between the 62k salary and 55k on the W2 - it's just the prorated amount for the partial year worked.

That's actually a really good point I hadn't considered. I'll reach out to our HR department to verify they're using the current W4 calculation method. They're a fairly small company so it's possible they're using outdated processes. That could definitely explain the discrepancy. I'm realizing from all these comments that I probably did get the child tax credit benefit, just in my paychecks rather than as a lump sum at tax time. I think I need to decide whether I want more money throughout the year or a bigger refund, then adjust my W4 accordingly.

I had this exact issue with my company last year! They were using outdated software that wasn't correctly applying the Child Tax Credit on the new W4 form. Took them 3 months to fix it but they eventually had to give me back pay.

What exactly should I be writing down? Just the total amount or do I need to break it down by credit card vs cash tips?

Ideally you should record both your cash and credit card tips separately for each shift. Credit card tips are already tracked by the restaurant's system, but having your own record helps you verify everything's correct. For cash, just the total amount per shift is fine - you don't need to track each individual transaction. Also record the date, which shift you worked (lunch/dinner), and your total sales if possible. This helps establish the reasonableness of your reported tips if there's ever a question. Many servers use tip tracking apps now that make this super simple - just a quick entry at the end of each shift.

This is so true. I'm in New York and the state department of taxation came after me even though I'd settled things with the IRS. They have their own penalty structures too.