Just wanted to add a practical tip for tracking everything - I use a simple spreadsheet with columns for date, description, amount, and category (income vs different expense types). Takes like 2 minutes per transaction but saves hours during tax time. For your specific situation with $75k W-2 + freelance, definitely consider the increased withholding route if your payroll allows it. Much less stress than remembering quarterly dates! I did quarterly payments my first year and missed the January deadline because I was on vacation - ended up with a small penalty that could have been avoided. One thing I wish someone had told me earlier: open a separate checking account just for your freelance income and expenses. Makes tracking SO much easier, and you can automatically transfer your estimated tax percentage (I do 30%) to a savings account every time you get paid. That way the money is already set aside and you're not scrambling come tax time.

Great advice in this thread! I'm dealing with a similar situation - W-2 job plus freelance design work. One thing that really helped me was using Schedule SE to double-check my self-employment tax calculations. It shows exactly how the Social Security wage base limit applies when you have both W-2 and self-employment income. For anyone wondering about the "double taxation" concern - you're not actually double-paying. Think of it this way: on your W-2 job, you and your employer each pay 7.65% (totaling 15.3%). When you're self-employed, you're wearing both hats, so you pay the full 15.3%. But the good news is you get to deduct half of that self-employment tax (the "employer" portion) on your 1040, which helps offset some of the burden. Also, don't forget about estimated tax penalties if you don't pay enough throughout the year. The safe harbor rule is helpful - if you pay at least 100% of last year's tax liability (or 110% if your prior year AGI was over $150k), you won't face penalties even if you owe at filing time. This can be especially useful in your first year of freelancing when income is unpredictable.

I found myself in this exact situation last year with my partnership. We dissolved in May 2023, and I was confused about whether to use 2022 or 2023 forms. I ended up filing the extension with Form 7004 and waiting for the 2023 forms to be released. It was annoying to have that hanging over my head for months, but in the end, it was the cleanest approach. The final return was accepted without issues once I filed it in January using the correct year forms. One tip I'd add - make sure you file final Schedule K-1s for each partner and clearly mark them as FINAL. Also remember to file any required state dissolution paperwork, which is separate from your tax obligations.

I went through this exact scenario with my LLC partnership that dissolved in August 2024. After calling the IRS and speaking with a tax professional, here's what I learned: You absolutely need to use the 2024 forms for your 2024 dissolution - using 2023 forms could create processing issues and potential penalties. The IRS considers this a 2024 tax year event regardless of when it occurred during the year. Here's my recommended timeline: 1. File Form 7004 by March 15, 2025 (the original due date) to get an automatic extension until September 15, 2025 2. Wait for the 2024 Form 1065 to be released (usually late December 2024 or January 2025) 3. File your final return using the 2024 forms During the waiting period, keep all your records organized and consider preparing a draft return using the 2023 forms just to identify any issues early. When the 2024 forms come out, you can quickly transfer everything over. Also don't forget - you'll need to distribute final Schedule K-1s to all partners and handle any state-level dissolution requirements separately. The wait is frustrating but it's worth doing it right the first time!

I'm dealing with a very similar situation as trustee for my grandmother's estate, and this thread has been incredibly helpful! One thing I'd add from my recent experience is to make sure you understand your state's specific trust accounting requirements early on. In my state (Colorado), I discovered that trustees are required to provide annual accountings to beneficiaries that clearly separate trustee compensation from expense reimbursements. I wish I had known this from the beginning because I had been lumping everything together in my informal tracking. For the car rental situation specifically, what helped me was creating a simple spreadsheet with columns for: Date, Rental Period, Trust Business Conducted, Miles Driven, and Total Cost. This made it really easy to show the connection between each rental expense and specific trust administration activities when I prepared my formal accounting. Also, don't forget that some rental car insurance and gas costs might also be reimbursable trust expenses if they were incurred for trust business. I initially thought I could only claim the base rental cost, but my attorney confirmed that reasonable associated expenses are typically covered too. The peace of mind from having everything properly documented is worth the extra effort upfront!

The consensus here is spot-on - legitimate expense reimbursements from a trust are not taxable income to you as the trustee. The $9,500 in rental car costs you mentioned should be fine as long as they were necessary for trust administration and you can document the business purpose. A few additional points to consider: First, make sure you're creating clear paper trails going forward. Write separate checks or make separate transfers for trustee fees versus expense reimbursements, and note the purpose on each transaction. Second, since you've already incurred these expenses, gather all your rental receipts and create a detailed log showing dates, destinations, and what trust business you conducted each day. The fact that you have a good relationship with the other beneficiary is great, but don't let that tempt you to cut corners on documentation. Proper accounting protects both of you and is typically required by state law regardless of everyone's current agreement. One practical tip: going forward, consider whether the standard IRS mileage rate might work better for your situation. At 67 cents per mile, it might be more cost-effective than continued rentals, plus the documentation is simpler (just track mileage and business purpose). But for the expenses you've already incurred, focus on getting them properly documented and reimbursed through the trust's formal accounting process.

Just wanted to add a perspective from someone who went through IRS scrutiny on this exact issue. I had a similar situation with my S-Corp - large cash reserves and what the IRS deemed an "unreasonably low" salary of $30k while the business was generating much more. The IRS audit was triggered not by the distribution itself, but by the salary-to-distribution ratio. They reclassified $45k of my distributions as salary, which meant I owed additional payroll taxes plus penalties and interest. It was expensive and stressful. Here's what I learned: The IRS uses several factors to determine "reasonable compensation" including what similar businesses pay for comparable work, your qualifications/experience, time devoted to the business, and the company's profitability. With $350k in accumulated cash, you're likely generating significant income, which makes a $24k salary look suspicious. My CPA now recommends the "60/40 rule" as a starting point - roughly 60% reasonable salary, 40% distributions. It's not a hard rule, but it's defensible. Before taking any large distribution, I'd strongly suggest increasing your salary to a more reasonable level first. The payroll taxes hurt, but they're much less painful than an audit and reclassification penalties. Also consider that business HYSA rates are often very competitive now - you might get 4%+ while keeping everything properly separated.

As someone who went through a similar situation with my S-Corp, I'd echo the concerns others have raised about your $24k salary. That seems dangerously low given the cash accumulation in your business account. Here's my practical suggestion: Before moving any money, work with a CPA to determine what your reasonable salary should actually be. In my case, I was underpaying myself by about $40k annually, which created problems when I tried to take large distributions later. Once you've adjusted your salary to a defensible level, you have a few good options: 1. **Business HYSA** - This is probably your safest bet. Many banks offer business savings accounts with competitive rates (often matching personal account rates). You keep proper separation while earning interest. 2. **Gradual distributions** - If you do want to move money personally, consider spreading it over 2-3 years rather than one large transfer. This helps with tax planning and looks less suspicious. 3. **Document everything** - Whatever you do, make sure it's properly recorded in your corporate minutes with clear business justification. The key is getting your salary right first. The IRS looks at the total compensation picture, and a $24k salary with $350k in business cash is going to raise eyebrows. Fix the salary issue, then you'll have much more flexibility with the excess cash without audit risk.

Quick tip that helped me understand my W-2: Your December paystub from the end of the year should have year-to-date totals that roughly match your W-2, but they won't be exactly the same if you have taxable benefits like group term life insurance over $50k or if your employer provides other taxable benefits. I was driving myself crazy trying to reconcile the numbers until my HR explained this!

Just to add another perspective on this - I work in payroll and see this confusion ALL the time! One thing that trips people up is that your W-2 Box 1 (taxable wages) can actually be LOWER than what you think you earned if you have a lot of pre-tax deductions. For example, if your salary is $60,000 but you contribute $6,000 to your 401k, have $3,000 in health insurance premiums, and $1,500 in other pre-tax benefits, your Box 1 will show $49,500. That's a $10,500 difference! This is why it's so important to understand that the IRS taxes you on your "taxable income" (Box 1), not your gross salary. The withholding calculations throughout the year are based on this lower Box 1 amount, which is why increasing your 401k contributions can actually reduce your tax burden both by lowering your taxable income AND potentially dropping you into a lower tax bracket. Pro tip: If you want to estimate your taxes mid-year, use your current Box 1 equivalent (gross minus pre-tax deductions) rather than your actual gross income!