Great questions, Dylan! For IRS notification requirements, you don't need to file anything special with the IRS immediately after the treasury stock transaction. However, you'll need to report it on your annual Form 1120-S, specifically on Schedule L (Balance Sheet) showing the treasury stock as a reduction in stockholders' equity. For corporate records, you should definitely update your stock ledger and corporate minutes to document the transaction. Some states may require filing amendments to articles of incorporation if the transaction affects authorized shares, but this varies by state. Regarding basis calculations and distributions - this is where it gets tricky. S Corp distributions must be pro rata based on stock ownership, so you'd calculate distributions based on outstanding shares (excluding treasury shares). If you originally had 4 shareholders with 25% each, and one shareholder's stock is now in treasury, distributions would be split equally among the remaining 3 shareholders (33.33% each) until those treasury shares are resold. For individual shareholder basis tracking, each remaining shareholder's basis continues to be adjusted for their pro rata share of S Corp income, losses, and distributions based on their percentage of outstanding shares. The key is maintaining good records of when the treasury stock transaction occurred to ensure proper basis calculations going forward. I'd definitely recommend working with a CPA experienced in S Corp accounting to make sure you're handling all the nuances correctly!

This is excellent advice about the shareholder agreement language! I'm actually in the early stages of setting up our S Corp buy-sell agreement and hadn't considered how specific we need to be about the treasury stock vs. redemption choice. When you mention using fair market value vs. book value, how do most companies handle the valuation process? Do you typically get a formal appraisal, or are there simpler methods that work for smaller S Corps? The $67,500 vs. $13,500 basis difference in the original example seems significant, so I'm wondering what drives that kind of valuation gap. Also, regarding the pre-arranged transaction concern - is there a specific timeframe the IRS looks at? Like if you buy back shares as treasury stock and then resell them within 6 months, does that create red flags? I want to make sure we structure things properly from the beginning rather than trying to fix issues later. Thanks for sharing your real-world experience - it's really helpful to hear from someone who's actually navigated these situations!

Smart move getting it in writing. Did you keep that documentation with your tax records? I'm wondering how long I should hang onto stuff like this.

Yes, I kept the email with my tax records for that year. The IRS generally recommends keeping tax records for at least 3 years after filing (or 2 years from when you paid the tax, whichever is later). For situations like this where there's potential confusion about employment status, I'd keep the documentation for the full 3 years just to be safe. It takes up virtually no space as a digital file, and having that employer confirmation could save you headaches if any questions ever come up during an audit.

This is really reassuring to hear from someone who's been through the exact same situation! I was definitely overthinking it. The "no income = nothing to report" rule makes so much sense when you put it that way. I'm going to stop worrying about it and just focus on getting my main W-2 entered correctly. Thanks for sharing your experience - it's exactly what I needed to hear as someone new to dealing with multiple job situations on tax returns.

That's a really good point about the bank records - I hadn't thought about using distribution records as supporting documentation. She did receive a couple of small payments last year that were deposited directly to her account, so we have those bank statements. We haven't tried the mutual connection approach yet, but that's actually brilliant. Her ex's brother is still friendly with us and works in accounting, so he might know their tax preparer personally. Sometimes a friendly conversation can accomplish more than all the formal requests in the world. The extension is looking more and more like the smart move here. Better to have breathing room to handle this properly than to rush and make mistakes. Thanks for the practical advice!

This is incredibly helpful advice! I especially appreciate the point about sending certified mail to both the ex-spouse AND the LLC's registered address - I hadn't thought about going directly to the business address. That creates an even stronger paper trail showing we exhausted all reasonable options. The legal consultation angle is interesting too. Even if we don't end up needing full legal action, having an attorney send a demand letter might be worth the cost just to get this resolved quickly. Sometimes people respond differently when they see letterhead from a law firm versus personal requests. One question - when you mention estimating conservatively for the extension, should she overestimate her tax liability to avoid underpayment penalties? We have K-1s from the previous two years showing modest profits, but the business has been struggling lately so this year might actually show a loss.

I do this every year! Just go to IRS.gov and search for "Get Transcript" - you can view all the forms that have been reported to your SSN including 1099-MISC from casinos. Super helpful to make sure you're not missing anything. There's usually a bit of a delay though, so forms from December might not show up until February.

Thanks for the tip! I'll definitely check that out. Better to catch any issues before filing than deal with a notice from the IRS later.

This is really helpful info! I'm new to all this tax stuff and had no idea about the marginal tax rate thing. Quick question - when you say keep detailed records going forward, what exactly should I be tracking? Like do I need to write down every single bet I make, or just the big wins and losses? And is there a specific format the IRS wants, or can I just keep a simple spreadsheet?

This is really helpful! I'm in a similar situation and was worried about the documentation requirements. Did you and your partner have to provide any specific proof of your 50/50 ownership beyond being on the deed? Also, did your tax preparer recommend any particular way to word the statement, or was the simple language you used sufficient? I want to make sure we get this right from the start.

Being on the deed together was sufficient proof of ownership for our tax preparer. We didn't need any additional ownership documentation beyond that. For payment proof, we kept copies of our bank transfers/checks showing how much each of us contributed to pay the contractor. The simple language I shared worked perfectly - our tax preparer said the IRS just wants to see that you're being transparent about the allocation and that it matches your actual financial contributions and ownership interests. As long as both of your statements use the same percentages and reference the same property/expenses, you should be fine. One thing our preparer emphasized: make sure you both keep copies of the contractor's invoice and any manufacturer certifications showing the heat pump qualifies for the credit. The IRS may ask for those if they have questions, even though audits for energy credits are relatively uncommon.

This is really useful advice about the timing! I hadn't thought about the "placed in service" date potentially affecting which tax year we claim the credit. Our installation is scheduled for late December, so I'll make sure to confirm with our contractor that everything will be completed and operational before year-end. The utility rebate tip is gold too - I just checked and our electric company does offer a $500 rebate for qualifying heat pumps that we can stack with the federal credit. Thanks for mentioning that! Do you know if those utility rebates affect the federal credit calculation at all, or can we claim the full 30% of our costs regardless of other rebates we receive?

Great question about utility rebates! Generally, you need to subtract any rebates or incentives you receive from the total cost before calculating the federal credit. So if your heat pump costs $8,000 and you get a $500 utility rebate, you'd calculate the 30% federal credit on $7,500 ($8,000 - $500 = $7,500 x 30% = $2,250 credit). However, there are some exceptions for certain types of rebates, so it's worth checking with a tax professional about your specific situation. The key thing is that you can't "double dip" - the federal government doesn't want to give you a credit on money that was effectively reimbursed by someone else. Also, make sure to get the utility rebate paperwork before you file your taxes, as some tax preparers recommend keeping documentation of all rebates received along with your federal credit documentation.