Has anyone dealt with their state's abandoned property laws when dissolving? I'm in a similar situation, and was told that if you can't repay all the shareholder loans, the unpaid portion might need to be reported as abandoned property to the state after dissolution. Seems crazy but my accountant mentioned it.

One thing to consider that hasn't been mentioned yet is the timing of your dissolution. Since you have substantial outside basis ($135K) and are only getting $7K back, you'll have a significant capital loss. Make sure you understand the capital loss limitations - you can only deduct $3K per year against ordinary income, with the remainder carried forward. Given the size of your loss, this could take decades to fully utilize unless you have capital gains to offset it against. Also, regarding the debt vs. distribution question - since you're the sole shareholder, the tax result is essentially the same. However, from a documentation standpoint, I'd recommend treating the $7K as a partial loan repayment and then formally canceling the remaining debt. This creates a cleaner paper trail showing you attempted to collect what you could before forgiving the balance. Don't forget to file Form 966 within 30 days of adopting the plan of liquidation, and make sure your final 1120S properly reflects the debt cancellation income (even if excluded under Section 108) and the corresponding basis adjustments on your K-1.

tbh ur better off faxing them. at least u know someone has to physically touch the paper eventually lol

Another trick that worked for me: try calling the business tax line at 1-800-829-4933 and ask them to transfer you to individual tax help. Sometimes they can bypass the main queue. Also downloaded the IRS2Go app which at least shows your refund status without having to call - might save you some frustration while you're waiting to get through!

Just wanted to add that the IRS actually does process paper Form 1065s much slower than electronic filings - typically 8-12 weeks versus 2-3 weeks for e-filed returns. So don't panic if you don't hear anything for a while after mailing. One tip I learned the hard way: make sure you sign and date the form in blue ink, not black. The IRS scanning equipment apparently has trouble distinguishing black ink signatures from photocopied signatures, which can delay processing. Also double-check that you've included Form 8832 if you're electing partnership tax treatment for your LLC - that's a common oversight that can cause headaches later. Good luck with your filing! Paper filing definitely works, it just takes patience.

Great question about Form 8832! If your LLC has more than one member (which yours does with 4 partners), the IRS automatically treats it as a partnership for tax purposes by default - no election needed. Form 8832 is only required if you want to elect a DIFFERENT tax treatment (like corporate taxation). So if you want partnership treatment (which is the default for multi-member LLCs), you don't need to file Form 8832 at all. You can just proceed with filing your Form 1065. The fact that you got an EIN doesn't constitute making any particular tax election - that's just getting a tax ID number. However, if you ever want to change your tax classification in the future (say, elect S-corp treatment), THEN you'd need to file Form 8832 or Form 2553. But for now, you're all set without any additional election forms!

Don't forget that the documentation matters as much as the classification! Regardless of whether you claim 50% or 100%, always record: 1. Who attended 2. Business purpose discussed 3. Date and location 4. Cost amount I learned this the hard way when I got a notice from the IRS questioning my meal deductions. Having a calendar invite showing "Board Meeting with Joe" wasn't enough. Now I take notes during meals and snap a pic of the receipt with my notes.

Great question! As someone who's dealt with this exact scenario, the key distinction is employment status, not board membership. Board members who aren't on your W-2 payroll are generally limited to the 50% deduction, even if they're shareholders. However, there are a few nuances worth considering: 1. **Timing matters**: If the meal occurs during an official board meeting where you're providing food as part of the meeting (similar to providing refreshments), this could potentially be treated differently than a casual business lunch. 2. **Documentation is critical**: Keep detailed records showing the business purpose, attendees, topics discussed, and how it relates to your S-Corp operations. This becomes especially important if the IRS questions your deductions. 3. **Consider the bigger picture**: While you might be limited to 50% on these specific meals, make sure you're capturing all legitimate business meal expenses throughout the year - they add up quickly. One tip: If your board meetings involve multiple people (other board members, key employees), the dynamics of the deduction might change. But for one-on-one advisory meals with non-employee board members, 50% is typically the safe approach. Always consult with your tax professional for your specific situation, but this framework should help you categorize these expenses appropriately.

As a newcomer to this community, I want to thank everyone for this incredibly thorough discussion! I'm also planning to give a performance bonus to one of my 1099 contractors and was completely unsure about the proper approach. The consensus here is crystal clear: treat it as additional compensation, document the business justification, report it on the 1099-NEC with all other payments, and communicate transparently with the contractor about timing and tax implications. What really stands out to me is how much contractors seem to appreciate the transparency and consideration for their tax planning needs. I had initially worried that bringing up tax implications might make the bonus feel less generous, but it sounds like it actually shows respect for their business operations. I'm particularly grateful for the practical tips about timing (asking about quarterly payment preferences), documentation (specific but not overly complex business justifications), and communication (explaining what impressed you and that it will be on the 1099-NEC). One final question for the group - for those who've done this multiple times, do you find it gets easier to have these conversations with contractors about bonuses and timing, or does it always require some coordination? I want to set up good practices from the start!

As a newcomer to this community, I wanted to share my recent experience with giving a contractor bonus that might be helpful to others in similar situations. I was in the exact same position as Oliver a few months ago - wanting to reward an outstanding 1099 contractor but being completely unsure about the tax implications. After doing research similar to what's been discussed here, I decided to go ahead with additional compensation rather than trying to find ways around it. What I learned is that being straightforward about it being taxable income actually made my contractor more confident in our business relationship, not less. When I reached out to discuss timing, they told me they really appreciated that I understood how their tax planning works and were considerate of their quarterly payments. I ended up giving the bonus in early December with a note explaining it was for their exceptional project management skills that saved us two weeks on our biggest client deliverable. They were thrilled, and when tax season came around, there were zero complications because everything was properly documented and expected. The key insight for me was that treating contractors as the business professionals they are - which includes being transparent about tax implications - actually makes these gestures more meaningful, not less. Your contractor will likely appreciate both the recognition and the professional way you're handling it!