Can you explain more about this S-Corp election thing? At what income level does it actually start making sense from a tax perspective?

The S-Corp election starts making financial sense when your business profit is high enough that the tax savings exceed the additional costs of maintaining an S-Corp. For most small businesses, that's typically around $60,000-$80,000 in annual profit. The primary tax advantage comes from splitting your income between a reasonable salary (which still gets hit with self-employment tax) and distributions (which avoid self-employment tax). But there are additional costs - you'll need payroll processing, more complex tax filings, and possibly higher accountant fees. It's definitely not worth it for businesses with modest profits.

Which state are you in? Some states have crazy high annual LLC fees! California is brutal at $800/year minimum.

How do you know if your plan allows this? Is it something I need to ask HR about specifically? I've never seen "after-tax contributions" as an option in either of my employer's benefit portals.

You need to ask your HR department or plan administrator specifically about "after-tax contributions" (not Roth contributions, which are different). Many employers don't advertise this feature even when they have it. You'll also want to ask if they allow in-plan Roth conversions or in-service withdrawals of these after-tax contributions. Not all 401k plans offer this option - it's more common with larger employers. If either of your plans does allow it, it's a powerful way to get more money into tax-advantaged accounts beyond the standard limits.

Is there an easy way to track this? My contributions are percentage-based, not dollar-based, so it's hard to calculate the exact amount going in each month, especially with bonuses.

Thanks for this! Quick question - what about things bought while on vacation in another state and brought back? Like if I buy clothes in Oregon (no sales tax) and bring them home to California?

That's exactly what use tax is designed for! If you buy clothes in Oregon (no sales tax) and bring them back to California, technically you owe California use tax on those items. This is one of the most common situations where use tax applies, but also one of the hardest for states to enforce. Generally speaking, if you bought something significant (like expensive electronics, jewelry, furniture, etc.) while out of state and didn't pay sales tax, you should report it on your state return and pay the use tax.

That's what I do! I just use the lookup table amount on my state return. Not worth the headache of tracking every little purchase. Though I did separately report a laptop I bought online tax-free since it was over $1000.

I hadn't even thought about state-specific credits! Do you know where I should look to find out if my state has different age requirements for their version of the EITC?

Check your state's department of revenue or taxation website - they usually have a dedicated page for state tax credits. Just google "[your state] earned income tax credit" and it should come up. You can also look at your state tax form instructions which typically list all available credits. About half of US states offer their own EITC, and the rules do vary. Some states make it a percentage of the federal credit, but others have their own qualifications. Worth checking because even if you don't qualify for the federal one, you might get some benefit from your state!

That's only partially right. You also qualify for EITC under 25 if you're a specified student who was in foster care or experienced homelessness. Just adding that detail in case it applies to OP or anyone else reading.

Do you have a source for that $5-6 return on investment figure? I'm not doubting you, just would like to read more about it since that's a compelling argument against budget cuts.

The Treasury Department's own analysis from 2021 estimated that every additional dollar invested in tax enforcement yields at least $5 in revenue. More recent studies suggest the return could be even higher for certain enforcement activities targeting high-income individuals and large corporations. For comparison, the Congressional Budget Office (CBO) has historically used more conservative estimates of a 3:1 to 5:1 return ratio, but even at the low end, that's still a 300% return on investment. There's a good article in the Journal of Tax Policy from last quarter that breaks down different enforcement activities and their respective ROIs. The highest returns come from audits of high-income individuals with business income and large corporations with international operations.

It's political theater. Politicians know attacking the IRS plays well with their base, regardless of the practical impacts. There's decades of anti-government rhetoric that's made "IRS" a four-letter word to many voters. Plus, powerful donors benefit from a weakened tax enforcement system.