When I did an OIC a few years ago, my credit actually improved because the tax lien was removed after acceptance. The IRS files a Notice of Federal Tax Lien when your tax debt gets high enough, and that definitely hurts your score, but once your OIC is accepted and paid, they remove it.

The documentation was definitely the most time-consuming part! Here's what I had to submit: I filled out Form 656 (the actual Offer in Compromise) and Form 433-A (Collection Information Statement). For the 433-A, I had to provide three months of bank statements for all accounts, pay stubs, proof of all my expenses (rent receipts, utility bills, car payment, insurance, medical expenses, etc.), and verification of any assets I owned. The key was being super detailed about my expenses and making sure I had documentation for everything. I also included a hardship letter explaining why I couldn't pay the full amount - in my case, ongoing medical expenses and reduced income due to changing jobs. One thing that really helped was organizing everything by category and creating a cover sheet for each section. The IRS examiner who called me actually commented on how well-organized my submission was and said that made their job easier. Honestly, it's a lot of work, but for me, getting rid of $27k in tax debt for $500 was absolutely worth the effort!

Thanks for bringing this up! I completely forgot about the childcare expenses. I've been paying for after-school care since we separated. Is there a specific form I need for the childcare credit? And does it matter if we've been splitting these costs or just whoever claims the dependent gets the credit?

You'll need Form 2441 for the Child and Dependent Care Credit. Generally, only the parent who claims the child as a dependent can claim this credit. However, there's a special rule for divorced/separated parents where the custodial parent can claim the credit even if they release the dependency exemption to the non-custodial parent. For expenses you've split, typically only the parent who claims the child can claim the credit for the expenses they personally paid. You can't both claim the same expenses. Keep good records of all payments you've made for childcare, including receipts with the provider's name, address, and tax ID number (EIN or SSN).

Yep, ran into this exact problem. My ex itemized without telling me, so I had to itemize too even though standard would've been better for me. Ended up paying way more in taxes that year. Communication is key, even if it's just through your lawyers.

1 Oh no, I completely forgot about state taxes. I'm in Illinois - any idea what percentage they take for self-employment income?

8 Illinois has a flat income tax rate of 4.95% for all income types, including self-employment. Unlike some states, Illinois doesn't have a separate self-employment tax (just the state income tax). You'll need to file an IL-1040 along with your federal return. Illinois does have underpayment penalties similar to the federal ones, but they're typically smaller. If you qualify for the federal first-time abatement that others mentioned, you might be able to request similar relief from Illinois by attaching a letter explaining your situation when you file.

20 Do you make quarterly payments from that account? I've been putting aside money but never know exactly how much to send for quarterly payments.

Would you recommend a Solo 401k over a SEP IRA for most S-Corp owners then? I'm currently using a SEP but wondering if I should switch.

Sometimes it's for tax efficiency, especially for companies that don't plan to go public. LLCs avoid the "double taxation" issue of C-Corps (where profits are taxed at the corporate level, then taxed again when distributed to shareholders). Some tech companies, particularly those that generate significant profits early and want to distribute them, prefer the LLC structure. It's also common in certain sectors like real estate tech or in companies backed by private equity rather than traditional VC. OP, one thing to check - some tech companies use an "Up-C" structure where there's a C-Corp on top for some equity and an LLC underneath for operations. This gets complicated fast, so definitely worth understanding which entity your equity is actually in.

Omg this sounds like a nightmare. Would a regular accountant even know how to handle this or would you need some kind of specialist? I'm getting offered something similar but now I'm wondering if it's worth the hassle.

You definitely need an accountant who specializes in multi-state taxation and pass-through entities. Regular tax preparers often struggle with this complexity. In my case, I ended up using a CPA who specialized in partnership taxation and charged about $2,500 for my tax return that year. Expensive, but worth it since they identified several state-specific deductions I wouldn't have known about. If your equity grant is significant, the tax complexity is probably worth dealing with. But for smaller grants, you have to weigh the potential upside against the added tax preparation costs and headaches.