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As the owner of a single-member LLC with S Corp taxation, what are pros/cons of having the S Corp contribute to my personal health insurance? Can I choose any percentage (0-100%)?
So I've been running my own business for about 3 years now as a one-person LLC, but last year I elected to be taxed as an S Corporation to save on self-employment taxes. Now I'm trying to figure out the best approach for my health insurance situation. Currently, I'm paying for my health insurance entirely out of pocket with personal funds (post-tax). My accountant mentioned something about the S Corp potentially contributing to my health insurance premiums, which sounded interesting. Apparently I can choose any percentage from 0% to 100% for the company to cover? I'm worried about messing up the tax treatment though. If the S Corp pays for my health insurance, is that considered a business expense? A fringe benefit? Part of my salary? I've heard conflicting things about deductibility on both the personal and business side. My premiums are about $840/month ($10,080 annually) and I'm trying to optimize both my business and personal tax situation. Would really appreciate input from anyone who's dealt with this specific situation before!
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Missing W-2 from Dollar Tree never filed by H&R Block - what now?!
So I'm totally freaking out right now. For years, I've been dropping off all my tax paperwork with my uncle who takes everything to Jackson Hewitt. Never had issues before, but now I'm in a mess! My disability attorney needed my W-2s and 1040 from 2022 for a case, and when I was going through the paperwork, I noticed something crazy. My Factory Supply job (where I made around $27K) is completely missing from my tax return! Jackson Hewitt only filed my other two part-time jobs that added up to like $13K. What's worse is that Factory Supply had withheld about $2400 in federal taxes that never got reported. And because my reported income was so low from just the two jobs, I qualified for some extra credit that gave me like $2000 more on my refund that year. I immediately called my uncle and was like "what happened?!" He swears he gave them ALL my W-2s including Factory Supply. He said the tax preparer was new and probably messed up. I still have the original Factory Supply W-2 sitting in my drawer. What am I supposed to do now? Can I get in trouble for this? I'm NOT paying penalties for THEIR mistake! I didn't even realize this happened until now when I needed these documents for my disability case.
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Definitely contact Jackson Hewitt directly too! Most big tax prep companies have a guarantee that covers their mistakes. When I had an issue where H&R Block missed a form, they covered all the penalties and interest because it was their error. Just make sure you have documentation showing you provided all the necessary forms. Text messages, emails, or anything showing you gave them the W-2 can help your case. Many prep companies will fight for you if it was their mistake, but you need to be persistent!
Thanks for the advice! I do have texts with my uncle confirming he had all three W-2s bundled together when he dropped them off. I wasn't sure if that would help since it wasn't direct communication with the tax preparer. Did you have to be super pushy with H&R Block to get them to cover the penalties?
Those text messages are a good start! You want to establish a paper trail showing you had the intention of filing completely and accurately. No, I didn't have to be super pushy with H&R Block, but I did need to be persistent and speak with a manager rather than just the first person who answered the phone. I made sure to remain calm but firm that this was their error, not mine. I brought copies of all my documentation to the meeting. Most importantly, I referenced their "Maximum Refund Guarantee" and "Accuracy Guarantee" specifically, which most of these big companies advertise. Ask Jackson Hewitt about their specific guarantees and policies for preparer errors - they should have something similar.
Quick tip from someone who works in tax prep (not Jackson Hewitt): when you file the 1040X, include a brief letter explaining the situation. Clearly state that the W-2 was provided to the tax preparer but was erroneously omitted from the original return. Keep it simple and factual - the IRS actually appreciates when taxpayers voluntarily correct errors, and they're often more lenient with penalties in these situations, especially when it's clear you're trying to fix someone else's mistake.
Is there a specific format or language we should use for this letter? I'm in a similar situation and don't want to say something wrong that could make things worse.
How to file federal tax online as an international student
Hey everyone, I'm a foreign exchange student with an F1 visa and this is my first time dealing with US taxes. My company from my summer internship didn't withhold any federal taxes, so now I'm looking at owing around $1,350 to the IRS. I've been using Sprintax to calculate my tax liability since they specialize in nonresident tax returns, but I'm confused about the actual payment process. When I tried using the IRS Direct Pay option, it's asking to verify my identity using information from previous tax returns - which I obviously don't have since this is my first time filing! Is there another way for me to pay these federal taxes online based on the calculations from Sprintax? What's the best approach for international students who haven't filed before? Any help would be super appreciated! Thanks!
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Have you considered using a payment plan if the $1k+ amount is difficult to pay all at once? International students can set up installment agreements too. You'd need to file Form 9465 with your return. Interest still applies, but it might help with cash flow.
That's actually really helpful to know! The full amount is a bit tough for me right now. How much is the interest rate if I go with a payment plan? And are there any specific issues with setting one up as an international student?
The interest rate is currently around 5% (it's the federal short-term rate plus 3%), and it's compounded daily. There's also a one-time setup fee of about $31 if you set up direct debit payments online. For international students, the main consideration is making sure you can complete all payments before your visa expires if you're planning to leave the US after graduation. Also, ensure your payment method will work internationally if you'll be making payments after returning to your home country.
Just want to add that as an international student, make sure you're filing Form 8843 along with your 1040-NR! It's required for all F1 students even if you don't have income. I missed this my first year and had to amend.
Is that the same as the "substantial presence test" form? My tax software mentioned something about that but I wasn't sure if it applied to me.
Need assistance negotiating tax penalties with IRS - not eligible for offer in compromise - seeking consultant recommendations
I'm in a really tough spot and could use some guidance. I'm dealing with IRS debt in the upper six figures, and I've hit a wall with my options. I've got too much equity tied up in my house to qualify for an offer in compromise, but with today's interest rates, refinancing would be financial suicide. My income situation is shaky given the current economic climate, plus I've got two kids heading to college soon that I need to support. I'm completely willing to liquidate most or all of my investment portfolio to tackle the majority of my back taxes. What I'm hoping for is some way to negotiate down the penalties and interest that have accumulated. My current CPA is great with normal tax stuff but freely admits he doesn't have experience negotiating with the IRS in situations like mine. I've already had consultations with Optima and a couple other tax relief companies, but after reading reviews online, I'm hesitant to move forward with any of them. Does anyone have recommendations for reputable consultants or firms that could actually help me negotiate with the IRS? I'm genuinely committed to getting my financial situation straightened out, but I'm completely lost on where to start with something of this magnitude.
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Has anyone here worked with a specific tax attorney they would recommend? I've been looking at reviews online but it's hard to know who's legitimate versus who just has good marketing.
I worked with Johnson Tax Law in Chicago and had a really good experience. They specialize in tax resolution and don't make unrealistic promises like some of the big advertised firms. They were upfront about costs and what could realistically be achieved.
One thing nobody has mentioned yet - depending on how old some of your tax debt is, you might be bumping up against the 10-year statute of limitations for IRS collections. Worth checking the dates of your assessments, because anything approaching that timeframe gives you additional leverage in negotiations. Also, if you're liquidating stocks, be careful about the timing to minimize additional tax implications. The last thing you need is a big capital gains hit while trying to resolve existing tax debt.
That's a great point about the collection statute. Some of this debt is from 2018-2019, so not quite close to the 10-year mark yet. And thank you for the reminder about capital gains - I hadn't even thought about how liquidating stocks would affect this year's taxes. Definitely need to be strategic about that.
Tax deductions for backyard studio office for LLC and W-2 work?
I'm currently working a full-time remote position (W-2 employee) but I also run my own single-member LLC on the side. Here's my situation: our house is completely out of extra space, and I desperately need a dedicated office area. I've started building a detached studio office in our backyard that I plan to use for both my regular job and my side business. The structure isn't permanent but will have electricity, heating/cooling, and I'll have both my day job and side business computers set up in there. It's basically going to be 100% dedicated to work - nothing else. I'm trying to figure out what expenses related to this backyard office I could potentially pay for through my LLC. Can I deduct construction costs? Utilities? Furniture? Internet? And how would this work with it being used for both W-2 employment and my LLC business? I've searched online but found conflicting information. Planning to consult with a tax professional eventually, but wanted to get some initial guidance here. Thanks in advance for any insights!
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Something important to consider with your backyard office - make sure it complies with local zoning laws and building codes! I built a similar setup last year for my consulting business and got hit with a fine because I didn't get the proper permits. Also, check if building the office will increase your property taxes or insurance rates. I had to update my homeowner's policy to specifically cover the new structure and all the technology inside it. These additional costs should factor into your decision about how to handle the tax side.
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.
Has anyone here actually successfully depreciated a non-permanent structure? My CPA told me that since my backyard office wasn't on a permanent foundation, it wouldn't qualify for depreciation but could be expensed differently. I'm getting confused with all the conflicting advice.
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.
Tyrone Hill
One thing nobody's mentioned yet is that if you have employees (or plan to hire some), there are non-discrimination rules to consider. If you provide health benefits to yourself as the owner but don't offer similar benefits to your employees, you could run into compliance issues. Most single-member S Corps don't have this issue, but it's something to keep in mind if you're planning to expand. The rules get more complex once you have a workforce.
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Harmony Love
AuthorThanks 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?
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Tyrone Hill
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.
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Toot-n-Mighty
I think everyone is overcomplicating this. I'm a single-member S Corp owner and I just have my corporation reimburse me for my health insurance premiums as part of an accountable plan, and it's never been an issue. Been doing it for 5 years without any problems.
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Rudy Cenizo
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.
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