Great question, Derek! I went through this exact same confusion with my RSUs from Microsoft last year. Based on what you're describing with Fidelity automatically selling shares to cover taxes, you're definitely dealing with a "forced sale" situation rather than net settlement. Here's what you need to know: Your company should already be reporting the full fair market value of all 130 RSUs as ordinary income on your W-2 for the year they vested. This covers the tax on the compensation aspect. However, you'll also need to report the sale of those 26 shares that were sold for tax withholding on Schedule D. The tricky part is that your 1099-B from Fidelity might show an incorrect cost basis (often $0) for those sold shares, which would make it look like you have a big capital gain when you actually don't. Since you already paid ordinary income tax on the full value through your W-2, the cost basis for those sold shares should equal the fair market value on the vesting date. If the 1099-B basis is wrong, you'll need to use Form 8949 to make the adjustment. Most people miss this and end up paying tax twice on the same income. The remaining 104 shares you keep have a cost basis equal to their FMV on vesting date, so when you eventually sell those, any gain/loss is calculated from that point. Hope this helps clarify things!

Derek, you're dealing with a really common source of confusion that trips up a lot of people with RSUs! Based on your description of Fidelity using sell-to-cover and only 104 shares ending up in your account while 26 were sold, this is definitely a "forced sale" scenario. The good news is that your employer has likely already handled most of the heavy lifting by including the full value of all 130 RSUs as ordinary income on your W-2 when they vested. This means you've already paid income tax on the compensation value of those shares. However, you do need to report the sale of those 26 shares that were sold to cover taxes on Schedule D. Here's the catch that gets most people: your 1099-B from Fidelity probably shows a $0 cost basis for those sold shares, which would create an artificial capital gain. Since you already paid ordinary income tax on their full value, the correct cost basis should be the fair market value on the vesting date. You'll need to use Form 8949 to make this basis adjustment - otherwise you'll end up paying tax twice on the same income. The 104 shares you kept don't need to be reported until you actually sell them, and their cost basis will be the FMV on the vesting date. This is one of those areas where the tax code creates unnecessary complexity, but once you understand the pattern it becomes much clearer!

This thread has been incredibly helpful! I'm in a similar situation with my consulting S corp and was nervous about taking my first distribution. The consensus seems clear that the transfer itself is straightforward, but the documentation and basis tracking are crucial. One thing I'd add based on my research: make sure your corporate resolutions or operating agreement address distributions if you haven't already. My attorney mentioned this could be important if you ever face an audit, as it shows the distributions were properly authorized corporate actions rather than informal money movements. Also, for anyone using multiple business bank accounts, I learned it's cleaner to always distribute from your main operating account rather than transferring between various business accounts first. Keeps the paper trail simpler for tax purposes. Thanks to everyone who shared their experiences - this gave me the confidence to move forward with my first distribution!

Even as a sole shareholder, documenting distributions through corporate resolutions is a smart practice. It demonstrates to the IRS that you're maintaining proper corporate formalities and treating the S corp as a separate legal entity, which helps protect your limited liability status. The language doesn't need to be complex - something like "RESOLVED, that the corporation is authorized to make a distribution of $X to the shareholder on [date] from retained earnings" is typically sufficient. You can find templates online or create a simple format and reuse it. I keep a corporate resolution book (just a simple binder) where I document major decisions like distributions, salary changes, and significant expenditures. Takes maybe 5 minutes per resolution, but it shows you're running things properly if you ever face scrutiny. Your attorney can provide templates if you want to be extra careful, but for routine distributions, basic language should be fine. The key is consistency - if you start documenting this way, keep doing it for all distributions. And yes, definitely stick with the main operating account for distributions. Makes year-end reconciliation so much easier!

This is such a timely discussion for me! I'm a newer agent (2 years in) but had a breakout year and am projected to hit around $400k this year. I've been putting off the S Corp decision but clearly need to stop procrastinating. One question I haven't seen addressed - does the IRS look at this differently for newer agents vs established ones? I'm worried that since I don't have a long track record, they might scrutinize my salary determination more closely. Like, can I justify the same salary percentage as someone who's been in the business for 10+ years? Also, for those who made the switch mid-year, how did you handle the transition? Did you have to do a partial year S Corp election or wait until the following tax year?

Great question about newer agents! The IRS doesn't explicitly treat newer vs. established agents differently for reasonable compensation, but your track record can definitely influence how you justify your salary determination. For a newer agent hitting $400k, you'd want to emphasize factors like: - Hours worked (newer agents often work longer hours) - Your direct involvement in all aspects of transactions - Market conditions that contributed to your success - Comparable salaries for employed agents with similar production levels The key is documentation. Since you don't have years of historical data, focus on current market comparables and your specific duties. Many newer high-producers actually justify higher salary percentages (50-60%) because they're doing ALL the work themselves. Regarding mid-year transitions: You can make an S Corp election mid-year, but it's complex. You'd need to file Form 2553 and potentially Form 8832. Many CPAs recommend waiting until January 1st to keep things cleaner, but if your projected savings are substantial, the mid-year election might be worth the extra complexity. Definitely run the numbers with a CPA who specializes in real estate to see if the partial-year savings justify the additional complications.

Hey Nadia! Military family here too, so I totally get the PCS stress. 🪖 I've been through this exact situation with VA twice now. The paper check usually takes 10-14 business days from when they process the DD portion. Since your DD was processed on 2/9, I'd expect the check sometime around 2/25-3/3. Pro tip: If you're really tight on timing for your PCS move, you can call the VA Tax Department and ask them to expedite the explanation letter via email while the check is still in transit. That way you'll at least know what the offset was for and can start working on resolving it if needed. The number is on their website under "Refund Inquiries." Good luck with your move! 🚛

I went through this exact same situation with VA last year! The check took about 12 business days to arrive after my DD portion hit. In my case, they had offset for an old DMV fee I completely forgot about from when I moved between counties. One thing that really helped me was creating an account on the Virginia Tax website - you can actually track the status of your refund there and sometimes it will show basic info about why part was withheld before the letter arrives. Just search "Where's My Refund" on their site. Since you mentioned PCS season, definitely keep all your documentation from this. If you're moving out of state, you'll want records showing any debts were resolved in case they try to follow you to your new duty station. Military moves can sometimes trigger old municipal debts to surface, so better to get ahead of it now. Hope your check arrives quickly and your PCS goes smoothly! 🇺🇸

As a newcomer to this community, I've been reading through this entire thread with great interest because my spouse and I are dealing with the exact same W4 confusion! We've been married filing jointly for about two years now, both working W2 jobs (I make around $49K, spouse makes $51K), and honestly, we've just been using the basic "married filing jointly" selection without really understanding what that means for our withholding. Reading everyone's explanations about Step 2c has been such a revelation! The way multiple people explained how each employer calculates withholding based on individual income rather than combined household income finally makes it all click. We've been fortunate so far - usually getting refunds of $400-600 each year - but after seeing how many couples got blindsided when their situations changed, I'm realizing we should be more proactive. Since we have exactly two jobs between us, it sounds like we should both check the 2c box on our W4s. Even though we're currently getting refunds, it seems like this would make our withholding more precise and protect us from potential surprises if our income changes in the future. This community has been incredibly helpful for understanding these confusing forms! Thank you to everyone who shared their real-world experiences - it's exactly what newcomers like me need to make informed decisions about our tax withholding.

As a newcomer to this community, I've been following this thread with great interest since my husband and I are facing the exact same W4 confusion! We both work W2 jobs (I make about $63K, he makes $57K) and have been married filing jointly for three years. Like many others here, we've been getting those "small but slightly concerning" refunds of around $250-400 each year. Reading through everyone's detailed explanations about how Step 2c works has been incredibly enlightening! The way people described how each employer calculates withholding based on individual income rather than combined household income finally made everything click for me. No wonder the W4 seemed so unnecessarily complicated for married couples. What really motivated me to take action was seeing how many people went from getting small refunds to suddenly owing thousands when their circumstances changed slightly. Since we have exactly two jobs between us, checking the Step 2c box on both our W4s seems like the smart preventive approach rather than waiting for a problem to develop. I'm planning to update both our W4s this week to check the 2c box instead of continuing with our current "hope for the best" strategy. It's so reassuring to see multiple success stories from people who made this change and found it worked well for their situations. Thank you to everyone who shared their experiences - this community is such a valuable resource for those of us trying to navigate these confusing tax withholding decisions!