Aaron, you're getting great advice here! Just to add one more perspective - I was in almost the exact same situation when I got married. My husband wanted to keep his finances private from my family, and we decided to file separately. The key thing that helped us was having a brief conversation about the "coordination points" that others mentioned. We made a simple checklist: 1) Are we both itemizing or both taking standard deduction? 2) Who claims any dependents (if applicable)? 3) How do we split shared deductions like mortgage interest? For us, it turned out we both benefited from taking the standard deduction anyway, so that part was easy. And since we split our mortgage payments 50/50, we each claimed half the interest when itemizing made sense in later years. Your mom can absolutely prepare your return with just your information and your wife's basic details (name/SSN). The privacy concern is totally valid, and married filing separately is specifically designed to allow couples to maintain financial independence while still being married. You're doing everything right!

You're getting excellent advice here, Aaron! Just wanted to chime in as someone who's been through this exact scenario. When my spouse and I got married, we had the same privacy concerns and decided to file separately. The good news is that your mom can absolutely prepare your return without needing your wife's income information (assuming you're not in a community property state, which it sounds like you're not). She'll just need your wife's name and Social Security Number for your return. One small tip that saved us some headaches - create a simple shared document or note where you and your wife can quickly coordinate on the key decisions: standard deduction vs. itemizing, and how you're splitting any shared deductible expenses like mortgage interest or charitable donations. You don't need to share detailed financial info, just the coordination points. We've been filing separately for three years now and it works great for maintaining financial privacy while staying compliant. Your approach sounds perfectly reasonable, and it's nice that your mom can help with the tax prep while still respecting your wife's privacy preferences!

I think there's some confusion here. Even with the 100% deduction in 2021/2022, you still needed to meet the "ordinary and necessary" business expense test. For delivery drivers, your meals during shifts are generally considered personal expenses, not business expenses. The IRS views this as: everyone needs to eat, whether working or not. Where people get confused is with the "de minimis" fringe benefit rules for employers. If an employer provides meals to keep employees working (like during busy periods), those can sometimes be 100% deductible for the EMPLOYER. But as a 1099 contractor, you're not your own employee in that sense.

Just to add - I've been driving for Uber/Lyft for years, and instead of trying to deduct meals, I focus on maximizing my mileage deduction (58.5 cents per mile for 2022). That's where the real tax savings are for us gig drivers! Also, don't forget you can deduct a portion of your phone bill, car cleaning, amenities for passengers, etc. Those are much safer deductions than trying to claim your Taco Bell lunch while on shift.

I'm dealing with a very similar S Corp situation right now and this thread has been incredibly helpful. One thing I want to add that might help others - I discovered that some states have "safe harbor" provisions for reasonable compensation that can provide clearer guidelines than the federal multi-factor test. For example, some states consider 1/3 of S Corp net income as a reasonable starting point for salary, though this varies significantly by industry and circumstances. It's not a guarantee, but it can provide a framework for calculations when you're trying to figure out what "reasonable" actually means for your specific situation. I also learned that if you're amending multiple years, you might want to stagger the corrections rather than doing them all at once. Some tax professionals recommend addressing the most recent year first, then working backwards. This can help manage cash flow since you'll owe back taxes plus interest and penalties for each year. The anxiety around this is real - I've been losing sleep over it too. But reading everyone's experiences here makes me feel more confident that proactively fixing these issues is the right approach. The IRS seems to be much more reasonable when you come to them first rather than waiting for them to find the problems. Has anyone here worked with a tax attorney versus just a CPA for S Corp amendments? I'm wondering if the complexity warrants legal representation or if a good CPA who specializes in business taxation is sufficient.

I'm reading through all these responses and feeling both relieved and overwhelmed. It's clear that the S Corp reasonable compensation issue is way more common than I realized - which is somewhat reassuring that we're not alone in this situation. Based on everyone's advice, I think our next steps are going to be: 1. Open a dedicated business bank account immediately and separate all future business transactions 2. Get a consultation with a CPA who specializes in S Corp compliance to review our specific situation 3. Calculate what reasonable compensation should have been for 2023 based on local market data for freelance design work 4. File amended returns (1120S/X and potentially 1040X) to correct the zero wage issue The point about the mid-year S Corp formation creating additional complexity is something I hadn't fully considered. We definitely need to make sure the January-March income is properly allocated to Schedule C versus the S Corp income. I'm still nervous about potential penalties and interest, but it sounds like proactively correcting these issues before any IRS contact is definitely the way to go. The stories about successful amendments and reduced penalties through programs like First Time Abatement give me hope that we can get through this without it being a financial disaster. Thanks to everyone who shared their experiences - this community has been incredibly helpful in what felt like a very isolating and scary situation!

Personal guarantees on business debt can indeed create "debt basis" for S-Corp shareholders, which is separate from stock basis. If you personally guaranteed any of that $67,500 in credit card debt, you would have debt basis equal to the amount you're personally at risk for. Here's how it works: Even with $0 stock basis, if you have debt basis from personal guarantees, you can still deduct S-Corp losses up to your total basis (stock basis plus debt basis). However, debt basis can only be used to deduct losses - it can't be used to take tax-free distributions. To determine what's "at-risk," look at whether you're personally liable for the debt. Credit cards where you signed personal guarantees would qualify. Business credit cards without personal guarantees typically wouldn't create debt basis. The interaction between stock basis and debt basis gets complex, especially when the S-Corp starts generating income. Income first restores stock basis, then debt basis. When losses occur, they first reduce stock basis to zero, then reduce debt basis. Given the complexity of your situation with negative equity and potentially guaranteed debt, I'd strongly recommend consulting with a CPA who has specific S-Corporation experience. The basis tracking rules are intricate, and getting it wrong from the start can create problems that compound over multiple tax years. Document everything now - which debts you guaranteed, when you guaranteed them, and keep detailed records of all future transactions affecting basis.

This is a great discussion thread that really highlights the complexity of S-Corp conversions from SMLLCs! As someone who went through a similar conversion two years ago (though with positive equity), I wanted to add a few practical considerations that might be helpful. First, regarding the $0 basis situation - while everyone's correctly pointed out that you can't have negative stock basis, it's worth noting that this doesn't mean you're in a bad position. Once your S-Corp starts generating income, that income will flow through and create positive basis before any distributions are made, which actually gives you more flexibility than you might think. Second, I'd recommend documenting your conversion date basis calculation very thoroughly. Create a balance sheet as of 12/31/2023 showing exactly what assets and liabilities transferred to the S-Corp structure. This becomes your "evidence package" if there are ever questions later about how you determined the initial basis. Third, consider the operational side of things - make sure you're following S-Corp formalities like corporate resolutions for major decisions, separate bank accounts, and proper payroll if you're taking salary. The IRS tends to look more closely at S-Corps that converted from single-member entities to ensure they're operating as true corporations. Finally, while the basis tracking seems daunting now, it actually becomes routine once you establish a good system. The key is consistency in your record-keeping from day one of the S-election. Hope this helps, and good luck with your first year as an S-Corp!

Something nobody's mentioned - if the mold remediation was medically necessary (like if someone in your household has a documented respiratory condition that was being affected by the mold), you might be able to deduct it as a medical expense. But there's a big catch: medical expenses are only deductible if they exceed 7.5% of your adjusted gross income AND you itemize deductions instead of taking the standard deduction.

Great discussion here! Just wanted to add one more angle that might be relevant - if your home was built before 1978, you should also check if any lead-based paint was disturbed during the mold remediation work. If the contractor had to do lead abatement as part of the process, that portion might qualify for different tax treatment. Also, since you mentioned this is your first home and you bought it in late 2023, make sure you're aware of any first-time homebuyer credits or programs in your state that might still apply to improvements made within the first year or two of ownership. Some states have specific programs for necessary health and safety repairs for new homeowners. The insurance angle mentioned above is definitely worth pursuing - even if your standard homeowners policy doesn't cover it, some policies have separate riders for environmental hazards that you might not be aware of. And definitely keep all that documentation organized regardless of immediate tax benefits - you'll thank yourself later!