Thanks for bringing up Form 4852! I actually didn't know about that option. So if I use my last pay stub to fill out this form, do I need to do anything special when filing my taxes? Like do I need to mail my return instead of e-filing?

You might need to mail in your return instead of e-filing if you're including Form 4852. Some tax software allows you to e-file with this form, but others don't. We ended up mailing ours to be safe. Also make sure you fill out Section 3 of the form explaining why you're filing a substitute W-2 and what efforts you made to get the original (like your phone calls and emails to the company).

Unfortunately that won't help in this case since they're trying to file 2022 taxes now in 2023/2024. They're already past the extension deadline. They need to file ASAP to minimize penalties.

Thanks for the tip! I'll definitely ask for a detailed breakdown. Did you have to pay interest on top of the missing FICA taxes?

No, I didn't have to pay any interest. Since it was their error, they only collected the actual missing FICA amounts. They initially tried to include interest in their calculation, but I pushed back and pointed out that their own policy stated that administrative errors shouldn't result in additional costs to employees. I'd recommend checking your university's HR policies on payroll errors. Most have some language about how corrections should be handled, and this might give you some leverage if they try to charge interest or penalties.

Good point. When my company had a similar FICA withholding error, I adjusted my W-4 to reduce other withholding temporarily while I was paying back the FICA. You can increase your allowances slightly to offset some of the pain if needed.

This is really helpful! I don't think he included both our original returns when he did the first amendment - that might be part of the problem. Should I be asking for copies of everything before he submits? I'm worried if I don't see it beforehand, I'll end up with another mistake.

Absolutely request copies of EVERYTHING before he submits! You should get: 1) The complete Form 1040-X 2) Any supporting schedules that have changed 3) A copy of both your original separate returns that are being attached 4) Any worksheets he used to calculate the new numbers Review each form carefully and make sure your children are properly listed with their names and SSNs on the appropriate form. Check that the "net change" column accurately reflects the difference between your original filing and the corrected amounts. Don't let him submit anything until you've had a chance to review it all. Given his track record, you're right to be cautious!

I did this too but recommend using tax software if you go this route. I used TaxAct for my amendment (changing from single to head of household) and it walked me through everything step by step. It was much easier than trying to figure out all the forms myself.

Thanks for bringing this up! We are claiming the Child Tax Credit for both kids, but I'm not sure if we've maxed it out. My husband does get 1099s and I know he needs to do the quarterly payments but honestly we never knew how to calculate them properly. Is there a simple formula to figure out roughly how much we should set aside from each check?

A simple rule of thumb is to set aside about 25-30% of his 1099 income for taxes. This covers both income tax and self-employment tax (which is roughly 15.3% alone). For proper quarterly payments, you can use the IRS Form 1040-ES worksheet, which helps calculate your required payments based on expected income. The due dates are April 15, June 15, September 15, and January 15 of the following year. Setting up a separate savings account just for taxes can be really helpful - deposit that percentage from each check immediately before you're tempted to spend it.

This is great advice! I'm a contractor too and opened a SEP IRA last year. Was able to contribute almost 20% of my income and it dropped me into a lower tax bracket. Saved me thousands.

Just be aware that SEP IRAs have an earlier deadline than traditional IRAs! For 2024 taxes, you need to set up and contribute to a SEP IRA by the tax filing deadline (including extensions) in 2025. Don't wait until last minute like I did!

This is really helpful advice. I hadn't thought about documenting the strategy formally. Is there a specific format you'd recommend for this kind of business plan? Also, does the board approval need to happen annually or just once when implementing the strategy?

There's no required format, but I'd recommend including projected capital needs, specific growth milestones, timeline for expansion, and how the retained earnings will be used. Make it clear this is a temporary strategy until the business can support you full-time. Board approvals should definitely happen annually. At minimum, you should have annual minutes documenting review of the compensation strategy and business progress. Each year, note how the retained capital is being used toward your stated goals and reaffirm the strategy. This creates a pattern of consistent business purpose rather than looking like an afterthought if questioned.

YES! My brother-in-law got absolutely hammered for this exact situation. Ran his consulting S-corp for 2 years taking zero salary and only distributions. Got audited, and the IRS reclassified ALL his distributions as salary, meaning he owed back payroll taxes plus penalties and interest. Cost him over $30k when all was said and done. They specifically target S-corps for this issue because it's such a common tax avoidance strategy.