Does the 1065 instructions specifically address this situation? I'm looking at the 2023 instructions and I don't see clear guidance on partner-to-partner sales...

One thing to keep in mind is the timing of when you recognize the ownership change during the year. You'll need to determine the exact date when the buyout was completed (when ownership officially transferred) to properly allocate the partnership's income, deductions, and credits. For the K-1s, use the "varying interest rule" under Section 706(d) to prorate each partner's share of items based on their ownership percentage during different periods of the year. So if the buyout happened mid-year, Partner D gets 25% allocation up to the buyout date, then 0% after. Partners A & B get 25% allocation before the buyout, then 37.5% after. Also make sure you update Schedule K-1, Part II (Partner's Share of Liabilities) to reflect the new ownership percentages. Partners A & B will need to pick up their additional share of partnership liabilities as part of their outside basis calculation, even though they paid cash for the interest. The partnership agreement should specify how these mid-year changes are handled - whether you use the closing-of-books method or proration method for allocating partnership items. This affects how precisely you need to calculate each partner's share.

I went through this exact process last year for my single-member LLC and can confirm that Form 2553 alone is sufficient. The IRS has specific guidance stating that for single-member LLCs electing S corp status, Form 2553 handles both the entity classification change AND the S corp election in one step. One thing I learned the hard way - make sure you understand the payroll requirements that kick in once your S corp election is effective. As an S corp, you'll need to pay yourself reasonable compensation through payroll (with all the associated payroll taxes) before taking any distributions. This was a surprise expense I hadn't budgeted for initially. Also, keep detailed records of when you filed Form 2553. The IRS doesn't always send a confirmation letter right away, so having your certified mail receipt or electronic filing confirmation is crucial if any questions come up later. The election becomes effective on the date you specify on the form (assuming it's filed timely), not when the IRS processes it.

Great question about reasonable compensation! The IRS doesn't give a specific formula, but they look at several factors: what you'd pay someone with similar skills and experience to do your job, your company's profitability, the time you spend working in the business, and compensation paid by comparable businesses in your area. A common rule of thumb is to pay yourself at least 60-70% of what the business profits, but it really depends on your industry and role. I ended up researching salary data on sites like Glassdoor and PayScale for similar positions in my area to justify my compensation level. I initially tried handling payroll myself using QuickBooks, but quickly realized the complexity of quarterly payroll tax filings, state requirements, and year-end forms (W-2s, 940, 941, etc.) was more than I wanted to deal with. Switched to Gusto after a few months - costs about $40/month plus $6 per employee (just me), but it handles all the tax filings automatically and provides good records for the IRS. The peace of mind was worth the cost, especially during my first year as an S corp when I was already learning so many new requirements. Budget-wise, expect to add payroll service costs, potential increases in accounting fees, and the employer portion of payroll taxes to your expenses. The tax savings can still make it worthwhile, but definitely factor in these additional costs when deciding if S corp election makes sense for your situation.

Has anyone had issues with getting their 1099 from DoorDash? Last year they sent mine super late and it caused all kinds of problems with my filing.

Great question about DoorDash taxes! I've been doing gig work for a couple years now and can share what I've learned. You're absolutely right to set aside 25% - that's actually a smart conservative approach. The key thing to remember is that you'll pay both regular income tax AND self-employment tax (about 15.3%) on your DoorDash earnings, but the self-employment tax only applies to your net profit after deductions. Since you're already tracking mileage with Stride, you're doing the most important thing. That mileage deduction at 65.5 cents per mile will likely be your biggest tax saver. For someone doing DoorDash part-time, the standard mileage rate is almost always better than tracking actual car expenses. One tip I wish someone had told me earlier: you can also deduct things like insulated delivery bags, a phone mount for your car, and even a portion of your phone bill since you need it for the app. Keep receipts for everything! As for quarterly taxes, since you have a W-2 job, you might be able to just increase your withholding there instead of making separate quarterly payments. That's often easier than trying to calculate and send quarterly payments to the IRS. Good luck with saving for that engagement ring! DoorDash can definitely help build up some extra cash when you're strategic about the tax side.

I've been following this discussion and wanted to add something that might help others avoid the confusion I went through. When I first saw Code AA on my W-2, I panicked because I thought I needed to somehow prove to the IRS that I had made Roth contributions to get some kind of tax benefit. What I didn't understand at the time is that Roth 401(k) contributions actually work against you in the current tax year - you're choosing to pay more taxes now so you can withdraw the money tax-free in retirement. That's why Code AA amounts are included in your Box 1 wages rather than subtracted from them. For anyone else struggling with this concept: if you contributed $5,000 to a traditional 401(k), that $5,000 would be missing from your Box 1 wages (reducing your current taxes). But if you contributed $5,000 to a Roth 401(k), that $5,000 stays in your Box 1 wages (you pay taxes on it now) and shows up as Code AA just for record-keeping purposes. The DD code for health insurance costs is even simpler - it's just there so you know what your employer spent on your behalf. Since employer-provided health insurance isn't taxable income to you, there's literally nothing to report.

This thread has been incredibly helpful! I'm a first-time tax filer and was completely stumped by these codes on my W-2. Like many others here, I was worried I was missing something important and would mess up my return. The explanation that Code AA and DD don't require any action on the 1040 is such a relief. I was spending hours trying to figure out where to enter these numbers, not realizing they're just informational. The analogy about Box 1 being the "final answer" after all adjustments really helped me understand how the W-2 works as a complete picture. I also want to echo what others said about double-checking your Box 1 wages entry if you're getting different refund calculations. I was accidentally trying to subtract my Code AA amount thinking it would reduce my taxes, but now I understand that Roth contributions work the opposite way - you pay taxes now to avoid them later. Thanks to everyone who shared their experiences and explanations. This community is amazing for helping newcomers navigate these confusing tax situations!

One thing nobody mentioned yet - you should also keep documentation that this specialist appointment was medically necessary. I got audited last year on medical expenses and they specifically wanted a letter from my primary doctor explaining why I needed to travel out of state for treatment instead of using local providers. Just save a referral letter or something similar.

Great question about airline miles for medical travel! I dealt with something similar when I had to fly to Mayo Clinic last year using Delta miles. The key is proper documentation - I recommend taking screenshots of what the same flight would have cost in cash at the time you booked it. Don't use current prices or average valuations you find online. The IRS wants to see what you specifically would have paid for that exact itinerary on that booking date. Also keep all your medical appointment confirmations, parking receipts, and any overnight stay expenses. If you have to make multiple trips like you mentioned, consider keeping a simple spreadsheet tracking each trip's purpose, dates, and documented cash equivalent values. One heads up - make sure your total itemized deductions (including these medical expenses) exceed the standard deduction for your filing status, otherwise it won't benefit you tax-wise. For 2024 taxes, that's $14,600 for single filers or $29,200 for married filing jointly.