I'm dealing with almost the exact same situation right now! I forgot to include about 3 months of unemployment compensation when I filed in February. Just got my 1099-G in the mail last week and realized my mistake. I've been putting off handling this because I'm terrified of dealing with the IRS, but reading through all these responses is really helpful. It sounds like filing an amended return is pretty standard and not as scary as I thought it would be. One question - if I already received my federal refund but haven't gotten my state refund yet, should I contact the state to let them know an amendment is coming? Or just file the state amendment and let them figure it out? I'm in California if that makes a difference. Thanks everyone for sharing your experiences - it's really reassuring to know I'm not the only one who made this mistake!

I can totally relate to this anxiety - I made a similar mistake two years ago and was absolutely panicking! But everyone here is right that this is much more common than you'd think, and the IRS really does appreciate when people catch and correct their own mistakes. One thing I'd add is to make sure you gather ALL your unemployment documentation before starting the amendment. You'll need your Form 1099-G obviously, but also keep records of any correspondence you had with the unemployment office and copies of your payment statements if you still have them. The more documentation you have, the smoother the amendment process will be. Also, when you calculate how much additional tax you'll owe, remember that unemployment compensation gets added to your other income, so it's taxed at your marginal rate. If you had withholding taken out of your unemployment payments (which many people do), that will reduce what you actually owe. In my case, I thought I'd owe around $800 but ended up only owing about $200 after accounting for the withholding. Don't let the stress eat at you - just get the amendment filed as soon as you can and you'll feel so much better having it behind you!

Check if you qualify for the fresh start program. Sometimes they can remove you from offset if you can prove financial hardship

Another thing to consider - if you're expecting a large refund, you might want to call NJ unemployment BEFORE filing and ask them to put a hold on the offset while you're actively making payments. Some people have had luck getting them to agree to this in writing, especially if you've been consistent with your payment plan. Won't hurt to try!

I've been through a similar conversion situation and wanted to share a few additional considerations that might be helpful. One thing that caught me off guard was the quarterly estimated tax planning aspect. Even with $0 starting basis, once your S-Corp starts generating income, you'll owe taxes on that pass-through income regardless of whether you can take distributions. I'd recommend setting up a system early to track your quarterly tax obligations separately from your basis tracking. In my first year, I made the mistake of using business profits to pay down debt without setting aside enough for estimated taxes, which created a cash flow crunch at year-end. Also, regarding the business credit card debt - make sure you understand how the interest and fees on that debt are treated for tax purposes after conversion. Since it's pre-conversion debt, the interest remains deductible as a business expense, but you'll want to keep clean records showing these were legitimate business expenses from before the S-election date. One practical tip: consider opening a separate "tax reserve" account where you automatically transfer a percentage of any S-Corp profits. This helps avoid the temptation to use that money for debt payments or operations when tax time comes around. I use about 30% as a safe margin, but your specific rate will depend on your overall tax situation. The basis tracking gets much easier after the first year once you establish good systems and habits. Hang in there - the complexity is frontloaded but becomes routine with time!

I'm in a very similar situation and this discussion has been incredibly enlightening! I converted my SMLLC to S-Corp status in January 2024 with about $45,000 in business debt against $18,000 in assets, so I'm also starting with $0 basis. One thing I've learned from my accountant that might be helpful - if you're planning to take any salary from the S-Corp (which you're required to do if you're actively working in the business), make sure you understand how payroll taxes interact with your basis situation. The salary you pay yourself doesn't affect your stock basis, but it does reduce the company's profits that would otherwise flow through and increase your basis. I've also found it helpful to create a simple monthly checklist to stay on top of the S-Corp requirements: updating basis tracking, reviewing guarantee documentation, calculating estimated tax reserves, and ensuring I'm maintaining proper corporate formalities. The administrative overhead is definitely more than an SMLLC, but having a systematic approach makes it manageable. For anyone considering the capital contribution route mentioned earlier, one timing consideration is that if you make the contribution early in the year, it gives you more flexibility for distributions later if the business performs better than expected. I'm planning a modest contribution in Q2 to create some positive basis cushion. The complexity seems overwhelming at first, but reading through everyone's experiences here gives me confidence that it's very manageable once you establish good systems. Thanks to everyone for sharing such detailed, practical advice!

I made a similar amount last year ($14k) and was disappointed to learn I couldn't get my Social Security and Medicare taxes back. But I did qualify for the Earned Income Credit which gave me back almost the same amount! Make sure you check if you qualify based on your age and income.

Just to add some clarity to what others have said - you're correct that Social Security and Medicare taxes (FICA) aren't refundable in most cases, but don't give up hope on getting money back! At your income level of $13,500, you should definitely look into the Earned Income Tax Credit (EITC) if you meet the age requirements (25+ if single with no kids). Also, make sure you're claiming the standard deduction ($13,850 for 2023 if single) which should zero out any federal income tax owed. And double-check that you're not missing any other credits you might qualify for - things like education credits if you're a student, or the Child and Dependent Care Credit if applicable. The key is understanding that while FICA taxes fund Social Security and Medicare (which you'll benefit from later), income taxes can often be fully refunded through deductions and credits when your income is low. Focus on maximizing those refundable credits!

Has anyone mentioned Form 4797? You'll need to fill this out when reporting the sale. Part of your gain might be subject to depreciation recapture at ordinary income tax rates, while another portion might qualify for capital gains treatment. TurboTax should walk you through this, but it needs those basis figures first.

I went through this exact same situation last year with my contractor van! The key thing to remember is that you need to look at ALL your past tax returns to add up the total depreciation you've claimed over the years. For your "Basis for gain/loss" - take your original $15,000 cost and subtract every penny of depreciation you've claimed on that van since you bought it. If you claimed $10,000 total in depreciation over those 6-7 years, your basis would be $5,000. For the "AMT Basis" - this is trickier because AMT uses different depreciation schedules (usually slower depreciation), so your AMT basis will likely be higher than your regular basis. One tip: since you used it 95% for business, make sure you're only entering the business portion when TurboTax asks. The personal use portion (5%) gets handled separately. Don't stress too much about audit flags - as long as you're reporting the sale and have reasonable documentation of your depreciation over the years, you should be fine. The IRS expects business vehicles to be sold eventually!