I'm a tax preparer and can confirm everything that's been shared here is accurate. The automated line at 1-800-829-8815 is indeed the most reliable way to get exact penalty and interest calculations for amended returns. One additional tip I give my clients: when you call that automated line, write down not just the total amount but also ask the system to break down penalties vs. interest. This helps you understand exactly what you're paying for and can be useful if you later want to request penalty abatement. Also, regarding payment logistics - you can include a check with your amended return (Form 1040X) made out to "United States Treasury" with your SSN and tax year written in the memo line. Just make sure the payment amount matches what the automated system calculated as of the date you mail everything. If there's a small discrepancy due to a day or two of additional interest, the IRS will either bill you for the difference (usually under $10) or send a refund if you overpaid slightly. For those asking about First Time Penalty Abatement - definitely worth trying if you qualify, but remember it only applies to failure-to-pay penalties, not interest. The interest will still need to be paid regardless of your penalty history.

As someone who just went through this exact scenario with my 2020 amended return, I can't stress enough how helpful this thread has been! The automated IRS line at 1-800-829-8815 that everyone mentioned is absolutely the gold standard for getting accurate calculations. I had a similar situation with about $3,200 in additional tax owed, and like others have reported, I ended up paying around $4,400 total - roughly 37% more than the base amount. What really surprised me was how the daily compounding interest adds up so quickly, even just a few days of delay can cost you. One thing I learned that might help PixelPrincess and others: when you do call that automated line, try to call on the same day you plan to mail your return if possible. I called on a Friday, calculated everything, then didn't mail until the following Wednesday, and ended up slightly underpaying by about $15. The IRS sent me a small bill later, but it was manageable. Also, definitely pursue First Time Penalty Abatement if you qualify - I was able to get about $380 in penalties waived, though as Elin mentioned, the interest portion still had to be paid. The phone call to request it was surprisingly straightforward once my amended return was processed. The peace of mind of having this resolved is worth every penny. Don't overthink it - call the automated line, pay the full calculated amount, and move forward!

This is really helpful information everyone! I'm leaning toward the actual expense method since I'll be using a truck with higher operating costs. Quick clarification question - when you mention keeping detailed mileage logs, should I be recording odometer readings at the start and end of each business trip, or is just noting the total miles sufficient? And for mixed trips (like going to the post office but also stopping for gas), do I need to calculate the exact business portion or can I count the whole trip if the primary purpose was business? Also @Lena Kowalski, that Section 179 tip is gold! I'm looking at trucks in that weight range specifically for hauling inventory, so that could be a game changer for my first year deductions.

Great discussion here! One additional point that might be relevant for your LLC - make sure you're familiar with the "luxury vehicle" depreciation limits if your truck costs over a certain threshold (around $64,000 for 2024). These limits can significantly impact your actual expense deductions and might make the standard mileage deduction more attractive in some cases, even for trucks. Also, since you mentioned this is your first year switching to actual expenses, remember that once you choose the actual expense method for a vehicle, you're generally locked into that method for the life of that vehicle. You can't switch back to standard mileage later. So it's worth doing the math carefully for your expected usage patterns over the next several years, not just year one. One more thing - if you're planning to finance the truck, the interest on the business portion of the loan is also deductible as a business expense when using the actual expense method. This can add up to significant savings over the life of the loan.

I'm dealing with this exact same situation with my S-Corp that I started in 2023! Reading through all these responses has been incredibly eye-opening - I had no idea the IRS was so strict about the salary requirement even when you're not taking distributions. Like you, I've been reinvesting everything back into growing the business and haven't taken a penny out personally. I was actually hoping I could avoid the whole payroll setup complexity until I started taking money out, but it sounds like that's not an option. The documentation aspect that several people mentioned really resonates with me. I think that's been my biggest mistake - not keeping records of my decision-making process around compensation. I've been so focused on just running the business that I haven't been thinking about creating that paper trail for potential IRS scrutiny. Based on all the advice here, it sounds like I need to: 1) Research comparable salaries in my industry and area, 2) Set a reasonable but affordable salary (maybe 60-70% of market rate given cash flow constraints), 3) Document my reasoning with a formal board resolution, and 4) Set up proper payroll processing. This thread has been a huge wake-up call. Better to get compliant now than deal with potential reclassification and penalties later. Thanks everyone for sharing your experiences - this kind of real-world guidance is so much more helpful than trying to parse through IRS publications!

This is such a great thread - I've learned so much from everyone's experiences! I'm in a similar situation with my S-Corp (started in 2022, sole owner, reinvesting everything) and had been putting off the salary question hoping it would somehow resolve itself. What really stands out to me from all these responses is the consistency of the message: the IRS doesn't care whether you take distributions or not - if you're actively working in the business, you need reasonable compensation as an employee. The documentation aspect everyone mentions makes total sense too. I think the key insight for those of us in cash-tight growth phases is that "reasonable" doesn't necessarily mean "full market rate." It sounds like you can justify a lower salary based on business financial constraints, but it needs to be genuinely reasonable - not artificially low to dodge payroll taxes. For the OP's situation with $33k in profit after expenses, setting aside $25-30k for salary (as several people suggested) seems like a good balance between compliance and cash flow management. The remaining amount stays in the business for growth, and you can always increase the salary as revenue grows. Thanks to everyone who shared their real experiences - especially those who dealt with IRS audits or got professional guidance. This kind of practical advice is invaluable for navigating S-Corp compliance!

Has anyone used cost segregation for a newly constructed single-family rental? I'm building a rental property and wondering if I should track construction costs by category from the beginning instead of doing a study later.

Yes, absolutely document with photos during construction! Take detailed pictures of electrical runs, plumbing rough-ins, HVAC ductwork, and specialty systems before drywall goes up. This visual documentation becomes invaluable for supporting your depreciation categories later. I'd also recommend keeping a detailed construction log noting dates and costs for each phase. When you install items like built-in appliances, custom lighting, or specialty flooring, photograph the installation process and keep all receipts with model numbers and specifications. One thing I learned the hard way - make sure your contractor understands you need separate line items for things like cabinet hardware, countertop installation, electrical fixtures, and flooring materials versus labor. The IRS likes to see clear distinctions between what qualifies for accelerated depreciation versus what's considered part of the building structure. Your future self (and your tax preparer) will thank you for this level of documentation. It's so much easier than trying to reconstruct everything after the fact!

This is really helpful information! I'm in a similar situation - been actively trading since early 2024 and dealing with the wash sale headache. One thing I want to add based on my research: even if you don't qualify for full TTS, you might still be able to deduct some trading-related expenses as miscellaneous itemized deductions (though these are currently suspended until 2025 under TCJA). Things like trading software subscriptions, market data feeds, and trading education could potentially be deductible once that suspension lifts. Also, @aef192fb4d37, since you mentioned being on a work visa - make sure to check if your visa status allows you to engage in trading as a business activity. Most work visas permit investment activities, but if you're claiming TTS, you're essentially saying trading is your business, which could potentially create complications depending on your specific visa type. The consensus here seems to be that professional help is worth it for the first year, especially given the complexity and potential audit risks. Better to get it right from the start than deal with problems later!

Welcome to the community, @48259063b1fa! Great questions about documentation requirements. For MTM election documentation, you'll want to maintain detailed records beyond just trade confirmations. The IRS expects to see evidence that you're treating trading as a business, which includes: - Trading journals showing your analysis and decision-making process - Time logs documenting hours spent on market research and trading activities - Records of your trading strategy and any changes to it - Documentation of your workspace/office setup for trading - Evidence of continuous and regular trading patterns Regarding educational expenses - yes, trading courses, books, software subscriptions, and even market data feeds could potentially qualify as business deductions if you achieve TTS. Keep all receipts! However, remember these miscellaneous itemized deductions are currently suspended through 2025 under the Tax Cuts and Jobs Act. The key is demonstrating that your trading activities constitute a trade or business rather than just investment activity. The more professional and business-like your approach appears, the stronger your case for TTS. Since you're new to this, I'd echo what others have said about getting professional help for your first year making these elections. The upfront cost of a qualified tax professional is usually much less than the potential cost of getting it wrong and facing IRS challenges later. Good luck with your trading and tax planning!