That's a great point that I hadn't even thought about! Did you find that the insurance increase was significant? And did you end up getting permits retroactively or did you have to make modifications to the structure?

My insurance went up about $240 annually, which wasn't too bad considering I had about $8,000 worth of equipment in there. The bigger surprise was that my property assessment increased after the county assessor noticed the new structure, which raised my property taxes by about $350/year. For the permits, I had to apply retroactively and pay a penalty fee (about $150 extra). I also had to make some modifications - mainly adding a specific type of smoke detector and upgrading the electrical work to meet code. The good news is that all of these costs were partially deductible for my business since I use the space 70% for business purposes.

Your CPA might be thinking about Section 179 expensing instead of regular depreciation. With Section 179, you might be able to deduct the full cost in the year you place it in service rather than depreciating over many years. There are limits though.

Thanks for bringing this up - I don't have employees right now but I'm planning to hire a part-time assistant next quarter. Would the non-discrimination rules apply even for part-time workers? Or is there a hours-worked threshold?

For health insurance specifically, the non-discrimination rules generally apply to employees working 30+ hours per week (considered full-time under the ACA). Part-time employees working fewer hours typically don't need to be offered the same health benefits. However, if you establish a health reimbursement arrangement (HRA) or other formal health benefit plan, different rules might apply. With a QSEHRA (Qualified Small Employer HRA), for example, you'd need to offer the same benefits to all eligible employees, but you can exclude part-time workers.

That's actually incorrect and could get you in trouble during an audit. Health insurance for >2% S Corp shareholders can't be handled through an accountable plan. It must be included on your W-2 as income (though not subject to FICA) and then deducted on your personal return. The IRS has specific rules for this situation outlined in Notice 2008-1. Using an accountable plan for health insurance reimbursement for a >2% shareholder is incorrect treatment and could result in the deduction being disallowed plus potential penalties.

Do you know if the 110% rule applies to state taxes too? I've been using it for federal but never thought about state requirements.

The safe harbor rules vary by state. Many states follow the federal 110% rule, but some have their own requirements. California, for example, has a similar safe harbor rule but with some differences. New York follows the federal rules pretty closely. Check your specific state's tax department website for their safe harbor rules. Generally speaking though, most states have some form of safe harbor protection, and many do follow the federal 110% guideline for higher income taxpayers.

Which tax software did you switch to? I'm getting tired of all the unnecessary warnings in TurboTax too.

$1500 sounds way more reasonable than what I was quoted! Did they provide written documentation of their findings that you could use if you were ever audited?

Yes, they provided a comprehensive memo documenting their research and conclusions for each state. The document included citations to specific statutes, regulations, and rulings that supported their position. They also included a matrix showing taxability by state with color coding for high/medium/low risk areas. This became our "reasonable cause" defense documentation in case of audit, which protects against penalties (though not the underlying tax if you're found to owe it).

Voluntary disclosure agreements (VDAs) can be incredibly helpful if you think you've had past exposure. Most states limit the lookback period to 3-4 years instead of their full statute of limitations, and they'll typically waive penalties. They're relatively straightforward to set up - you can even apply anonymously through a representative in most states until you have certainty about the terms. I'd suggest starting with the states where you have the most sales before they find you through audit or data mining.

Did you claim any tax credits like earned income or child tax credit? Those automatically delay processing until at least mid-February because of the PATH Act.

No tax credits like that. Just a standard return with a W-2 and mortgage interest deduction. Nothing complicated! That's why it's so annoying - my husband's return is actually more complex than mine with business income and he gets his refund in like a week. Meanwhile I'm over here waiting 6+ weeks every year for my simple return. Makes zero sense.

I filed Jan 29 and still waiting lol. So much for the "file early" strategy working for everyone 😂