Has anyone considered the W-2 wage limitation for QBI? Since OP is in the 24% bracket with joint income, they might face QBI limitations if they don't have sufficient W-2 wages. The deduction could be limited to 50% of W-2 wages paid by the business. Also for 2023, did you take any money out of the business? If so, the IRS might reclassify those as constructive dividends which wouldn't qualify for QBI. The cleanest solution might be filing an amended S-corp return showing reasonable compensation.

You're in a tricky spot, but it's not insurmountable. Since you didn't run payroll in 2023, you'll need to address this compliance issue head-on with your accountant. The IRS expects S-corp owner-employees to receive reasonable compensation through W-2 wages before taking distributions. Without proper payroll, you risk having all $71.5k treated as wages subject to employment taxes, which would eliminate the S-corp tax advantages. For QBI, the deduction applies to the business income AFTER reasonable compensation is paid. So if you can establish that $49k salary retroactively (through amended returns or other corrective measures your CPA recommends), the remaining income could potentially qualify for QBI. One silver lining: since your combined income keeps you in the 24% bracket, you're below the taxable income thresholds where QBI gets limited by W-2 wages or depreciable property. This means if you can properly separate salary from business income, you should get the full 20% QBI deduction on the qualifying portion. Document everything about your reasonable compensation analysis - industry standards, time spent, responsibilities, etc. This will be crucial for your accountant to determine the best path forward, whether that's amended returns, late payroll filings, or other compliance solutions.

One thing to add that could save you significant headaches - make sure you and your partner are aligned on the purchase price methodology before you get too far into the process. I've seen partnerships fall apart during buyouts because one person expected a valuation based on book value while the other expected fair market value. Since you mentioned meeting with an accountant, I'd suggest having that conversation with your partner present (or at least having a separate meeting with them) to discuss valuation methodology, payment structure, and how you'll handle any working capital adjustments or outstanding liabilities. Also, don't forget about any personal guarantees you might have on business loans or leases. Your partner will likely need to either assume those guarantees or help you get released from them as part of the buyout. This isn't directly a tax issue, but it can complicate the transaction and affect the final purchase price negotiations. The good news is that with proper planning and documentation, LLC member buyouts are pretty straightforward from a tax perspective - it's just important to get all the details right upfront rather than trying to fix issues later.

One important consideration that hasn't been mentioned yet is state-level tax implications. While everyone's focused on federal taxes (which is absolutely correct), don't forget that some states have different rules for capital gains treatment or may not recognize S-Corp elections the same way. For example, some states tax capital gains as ordinary income, while others have preferential rates. And a few states don't recognize federal S-Corp elections, meaning your LLC might be taxed differently at the state level even though it elects S-Corp treatment federally. Also, if you or your business operate in multiple states, you might need to consider apportionment rules and whether the sale triggers any filing requirements in states where you don't typically file returns. I'd definitely ask your accountant to review both federal and state implications before finalizing the transaction structure. State taxes can sometimes be a significant portion of your total tax liability, and the rules vary widely by jurisdiction.

Just want to add some encouragement here - you're absolutely doing the right thing by taking care of your nephew! As others have mentioned, single people can definitely claim dependents. One thing I'd suggest is keeping a simple log or calendar marking the days your nephew stays with you. The IRS counts nights spent in your home, so having clear documentation that he's been with you since August (and will be through the end of the tax year) helps establish the "more than half the year" requirement. Also, don't forget about potential education credits if your nephew is in school - the American Opportunity Tax Credit or Lifetime Learning Credit could provide additional tax benefits on top of claiming him as a dependent. Between the Head of Household filing status, the dependent exemption, and education credits, you could see some significant tax savings for doing what's already the right thing for your family! Keep all those receipts for his expenses - they're your proof that you're providing more than half his support.

Just wanted to chime in as someone who works seasonally preparing taxes - you're absolutely on the right track! Single people can definitely claim dependents, and your situation with your nephew sounds like it meets all the requirements. Since he's been living with you full-time since August and you're covering more than half his expenses, you should qualify for Head of Household status which is a huge tax advantage. The standard deduction difference alone could save you over $1,000 compared to filing single. One tip from my experience: if your nephew is under 17, don't forget about the Child Tax Credit - that's up to $2,000 per qualifying child that can directly reduce your tax liability (and potentially give you a refund even if you don't owe taxes). Since your income is $58,000, you should qualify for the full amount. Also, keep detailed records not just of big expenses like medical bills and school costs, but also everyday things like groceries, clothing, and transportation costs for him. The IRS defines "support" pretty broadly, and all those daily expenses add up to show you're truly providing more than half his total support.

This is exactly what I needed! I've been stressing about my transcript showing codes I couldn't understand. Just checked and I have 150, 806, 766, and 570 - sounds like my return processed, credits applied, but now it's under review for ACTC. Quick question for anyone who's been through this - does having code 766 mean I'm definitely getting the Additional Child Tax Credit, or could it still be denied during the review process? Also, is there typically a specific timeframe for how long the 570 hold lasts for PATH Act returns? Really appreciate posts like this that break down the government speak into something us regular folks can actually understand! The IRS website basically just says "your return is being processed" which tells us absolutely nothing 🤷‍♀️

This is seriously one of the most helpful posts I've seen on here! I've been checking my transcript daily and feeling completely lost with all these random numbers. Just looked at mine and I have codes 150, 806, 768, and 971 - so it sounds like my return processed, withholdings applied, EIC credited, but they sent me some kind of notice? Haven't gotten any mail yet though, so maybe it's just an internal thing like someone mentioned. The waiting game with PATH Act is brutal but at least now I understand what's actually happening behind the scenes instead of just staring at "still processing" on WMR forever. One thing I'd add for anyone else dealing with this - I've noticed that even after you get all the right codes, the actual refund deposit can still take a few extra days beyond what the 846 date shows. My bank told me government deposits sometimes have additional processing time on their end too. Thanks for taking the time to put this together! Definitely saving this post for future reference 💯

I work as a tax preparer and see these situations frequently. Based on what you've described, your $45,000 settlement for emotional distress and mental anguish is likely taxable income since it doesn't appear to stem from physical injuries. A few important things to consider: 1. The absence of a 1099 doesn't mean it's not taxable - you're still required to report settlement income even without formal tax documents. 2. If your settlement agreement broke down the payment into different categories (lost wages, punitive damages, emotional distress, etc.), each portion may have different tax treatment. 3. You mentioned attorney fees - this creates additional complexity. If your attorney took a contingency fee, you'll need to report the gross settlement amount as income and potentially deduct the legal fees, though recent tax law changes have made this more difficult for employment-related cases. My recommendation: consult with a tax professional who can review your actual settlement agreement. The specific language matters enormously for tax treatment, and generic advice (even from well-meaning friends who are accountants) may not apply to your particular situation. Don't wait until the last minute on this - settlement taxation can be complex and you want to get it right.

I went through something very similar last year with an employment settlement. The key thing that helped me was getting a consultation with a tax attorney who specialized in settlement taxation rather than just a regular CPA. Here's what I learned: the IRS looks at the "origin of the claim" test - basically what was the underlying reason for your lawsuit? If it was purely workplace harassment/hostile work environment without any physical injury component, then yes, it's likely taxable. However, there are some nuances that matter: - If any portion was specifically for lost wages, that's definitely taxable as ordinary income - If there were punitive damages, those are also taxable - Medical expenses you paid for therapy/treatment related to the distress can potentially be deducted For reporting without a 1099, you'd typically report it as "Other Income" on Schedule 1 of Form 1040. But definitely get professional help because the attorney fee situation can get really complicated - especially with the recent changes to itemized deduction rules. Don't let this stress you out too much though. Even if it's fully taxable, you can always set up a payment plan with the IRS if you can't pay all at once. The important thing is to report it correctly and not try to hide it.