Make sure you've considered your basis allocations too! I made a huge mistake in a similar transaction. Had bought my property+business for $350k years ago, but never properly allocated the purchase price between land, building, and business assets. When I sold, my accountant had to reconstruct everything to figure out my adjusted basis in each component. Ended up paying way more tax than necessary because I couldn't properly document some improvements I'd made to the building. So beyond just the allocation of the sale price, make sure you've got your cost basis properly allocated too!

One thing that hasn't been mentioned yet - if you're doing a 1031 exchange on the real estate portion, make sure you understand the "net equity" rule. You need to purchase replacement property of equal or greater value AND put the same amount or more of equity into the new property to defer all the capital gains. So if you're allocating $800k to real estate and you had, say, a $300k mortgage that was paid off at closing, you'd need to put at least $500k equity into your replacement property. A lot of people get tripped up thinking they just need to buy something worth $800k, but if they finance more of the new purchase, they could end up with taxable "boot." Also, since you mentioned the booming real estate market in your area - remember you have to identify your replacement property within 45 days of closing, and that clock doesn't stop ticking. In hot markets, properties can go under contract quickly. Consider identifying multiple properties in case your first choice falls through.

Don't forget about state-specific requirements! I'm in California and there are additional state payroll tax requirements for S Corps that weren't obvious when I first started. Each state has different rules about unemployment insurance, disability insurance, etc. Make sure whatever payroll system you choose handles your specific state's requirements.

This is exactly the situation I went through 8 months ago when I converted to S Corp! The learning curve is steep but totally manageable once you get the basics down. A few key points that helped me: 1. **Payroll frequency matters**: Don't wait until year-end - I do monthly payroll which keeps things simple and looks legitimate to the IRS. Set a consistent schedule and stick to it. 2. **Reasonable salary research**: For software development, I used sites like Glassdoor, PayScale, and Bureau of Labor Statistics to document what similar roles pay in my area. I keep this documentation in my tax files as backup. 3. **Start simple**: You don't need an expensive payroll service right away. I started with a basic one that handles the 941 quarterly filings and W-2s automatically. The peace of mind is worth the monthly cost. 4. **State requirements vary**: Check your state's specific rules - some have additional requirements beyond federal. I almost missed registering for state unemployment insurance in my state. The tax savings definitely outweigh the complexity once you're set up. Just budget for the payroll service cost when calculating your overall S Corp savings. Feel free to ask if you have specific questions about any part of the process!

Hey Malik! I totally feel your stress - I had the same panic when I saw a 291 code on mine last year. Turns out it was actually good news for me! The IRS caught that I had accidentally left off one of my 1099-INTs and they added the missing interest income, which actually qualified me for a bigger refund due to some calculation changes. The waiting is absolutely brutal though - I must have checked my transcript like 50 times that week lol. In most cases, these adjustments are pretty routine and get resolved within a few weeks. Try to hang in there and don't let the unknown eat at you too much. The IRS computers are actually pretty good at catching errors that work in taxpayers' favor too, not just against us. Keep us updated on how it turns out! 🤞

Hey Malik! I totally understand the anxiety - I went through the same thing last year and was checking my transcript obsessively too! Code 291 usually means they're making an adjustment, but it's not necessarily bad news. In my case, they caught that I had accidentally claimed the wrong filing status and corrected it, which actually ended up increasing my refund by about $300. The waiting period is definitely the hardest part because you just don't know what's happening. From what I've learned, larger refunds often get flagged for review just as a precaution. Try to look for any accompanying codes like 766 or 768 that might give you more clues about what type of adjustment they're making. Most of these situations resolve within 2-4 weeks, so hang in there! The IRS computers are actually pretty good at catching errors that benefit taxpayers too, not just ones that reduce refunds. Keep us posted on how it turns out! 🙏

This is exactly the kind of detailed breakdown I needed! I'm in a similar situation and was getting overwhelmed by all the different tax implications. One thing I want to add for anyone else reading this: make sure you understand how your specific 401k plan handles hardship withdrawals. Some plans require you to take loans first before allowing hardship withdrawals, and others have specific documentation requirements that can take weeks to process. Also, I learned the hard way that you typically can't pay back a hardship withdrawal like you can with a 401k loan. Once it's out, it's out - so you lose all the future tax-deferred growth on that money. When I calculated the long-term cost including lost compound growth over 20+ years, it really put the true cost into perspective. The tax hit is painful enough, but the opportunity cost of losing decades of compound growth might be even more expensive in the long run. Just something to factor into your decision if you have any other options available.

Something else to consider that I haven't seen mentioned yet - timing your withdrawal strategically within the tax year can make a difference too. I had to take a hardship withdrawal last year and my CPA advised me to wait until January of the following year since I had already received a bonus that pushed me into a higher bracket. By waiting a few months, the withdrawal was taxed in a year where my base income was lower, which saved me about $1,200 in taxes. Obviously this only works if your hardship situation allows for that kind of timing flexibility, but it's worth considering if you're on the border between tax years. Also, don't forget that you'll need to file Form 5329 with your tax return to report the early withdrawal and calculate any penalty exceptions. Your 401k administrator should send you a 1099-R form showing the distribution, but you're responsible for properly reporting it and any applicable penalties or exceptions on your return.

This thread has been absolutely amazing to read through! I'm actually in a somewhat similar situation where my in-laws want to help us with some unexpected home repairs (about $16k), and I had no idea whether we'd need to report that as income. Seeing all these real experiences from people who've been through gift situations has been so educational and reassuring. What really stands out to me is how consistent everyone's experience has been - gifts to recipients are never taxable income, period. The "already-taxed money being transferred" explanation really makes it click. It's also reassuring to see how many tax professionals and people who work in banking have chimed in to confirm what everyone else has shared. The practical tips about documentation and what to expect when depositing larger amounts are incredibly helpful too. I never would have thought about bringing a simple letter to the bank, but that seems like such a smart way to be prepared. Thank you to everyone who took the time to share their experiences and knowledge! It's communities like this that make navigating these confusing financial situations so much less stressful. Your aunt and uncle sound wonderful for helping you with those student loans - what a generous gift that will make such a meaningful impact on your financial future!

This has been such an informative and reassuring discussion! I'm actually the original poster (just using a different account now), and I can't thank everyone enough for sharing their experiences and expertise. When I first posted this question, I was honestly pretty anxious about potentially messing up my taxes or getting in trouble with the IRS over this generous gift from my aunt and uncle. Reading through all these responses - from tax preparers, people who've been in similar situations, banking professionals, and just helpful community members - has completely put my mind at ease. The consistent message that gifts to recipients are never taxable income, regardless of amount, is so clear now. The "already-taxed money being transferred" explanation really made it click for me. I'm also really grateful for all the practical tips about documentation, what to expect at the bank, and how to handle the deposit. I feel so much more prepared and confident now about accepting this gift and putting it toward my student loans without any tax worries. This community is absolutely amazing for helping navigate these confusing financial situations. Thank you all for taking the time to share your knowledge and experiences - you've made such a difference in helping me (and clearly many others) understand this situation properly!