That's really important to know - I hadn't considered the long-term compliance requirements. If the OIC is accepted, I'll definitely need to set up a system to help him stay on track with quarterly payments. Maybe setting up automatic transfers to a tax savings account? Would monthly estimated payments be allowed instead of quarterly to make it more manageable?

Monthly payments towards quarterly tax obligations are definitely doable and often more manageable for people with executive functioning challenges. I recommend setting up an automatic transfer to a separate "tax account" on a monthly basis. The IRS just wants their quarterly payments received on time - they don't care how you save for them. Another approach that helps many of my clients is having a tax professional set up automatic reminders and check-ins. The most important thing is creating a system that doesn't rely on memory or executive function. Payment plans with automatic drafts can also be very helpful if needed in the future.

This is a great point. When I submitted my OIC, the IRS initially rejected it because they calculated "imputed income" for my housing situation since I was staying with family. I had to resubmit with documentation showing the arrangement was temporary due to financial hardship.

Thank you for pointing this out! He actually does help care for our parents occasionally, so I'll make sure to document that as part of the living arrangement. He doesn't currently receive any assistance programs but may qualify for some based on income. Would applying for those programs before submitting the OIC be beneficial? Or would that potentially complicate matters?

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.

How do you determine what percentage is "reasonable"? Is there a specific formula the IRS uses or is it more of a judgment call?

There's no specific formula or percentage the IRS mandates - it's more of a facts and circumstances test. The IRS looks at factors like your qualifications, duties, time spent in the business, what comparable positions pay in your industry and region, and the financial performance of your business. For some businesses, a 50/50 split might be perfectly reasonable, while in others (especially service businesses where the owner's expertise is the primary value), the salary portion should be higher. I recommend researching salary data for your position in your area using resources like the Bureau of Labor Statistics or industry compensation surveys to support whatever split you choose.

I've used both. Gusto is MUCH more user-friendly for S-Corp payroll specifically. They have an owner setup wizard that walks you through things like reasonable compensation documentation. QuickBooks is more robust for overall accounting but their payroll can be confusing for S-Corp owner-employees. Gusto also automatically handles all the special forms for paying yourself as an S-Corp owner.

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.

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.