Small business tax returns and personal returns - Should we file jointly or separately?

This is a great question! For your personal taxes, you and your husband can still file jointly - that hasn't changed just because he owns businesses. The S-corporations are separate entities that file their own tax returns (Form 1120-S). Here's how it works: The S-corps will file their own returns, but they don't actually pay taxes themselves. Instead, they issue Schedule K-1 forms showing your husband's share of income, deductions, and credits. That information then gets reported on your joint personal tax return (Form 1040). As for doing it yourself vs. hiring an accountant - while you have good experience with personal returns, S-corporation returns have some complexities. There are specific rules about reasonable compensation, distributions, and maintaining corporate formalities. Making mistakes here can trigger IRS scrutiny. That said, if you're comfortable learning new tax concepts, many tax software packages do handle S-corporation returns. You might consider using one for the first year and seeing how it goes. Just be prepared to spend extra time researching S-corporation requirements.

I was in a similar situation last year with my wife's consulting business and trying to figure out taxes. After weeks of stress and confusion, I found this AI tax assistant at https://taxr.ai that literally saved me hours of research. It reviewed all our business documents and explained exactly how the S-corp income would flow to our personal return. It even highlighted deductions specific to my wife's industry that I had no idea about! The tool actually explained the whole K-1 situation in terms I could understand rather than the IRS jargon that was making my head spin. What I liked most was that I could upload our previous returns and it showed me exactly what would change with the business income. Might be worth checking out since you're comfortable with taxes and just need guidance on the business aspects.

Just wanted to follow up about my experience with that taxr.ai site. I was skeptical at first (honestly thought it might be some basic calculator), but it's actually pretty sophisticated. I uploaded our documents last weekend, and it identified that I was planning to take too many distributions compared to salary in our S-corp, which apparently is a red flag for audits. It gave me specific guidance on setting a reasonable salary based on my husband's industry and role, then showed exactly how everything would flow through to our personal return. Saved me from making what could have been a costly mistake. The explanations were way clearer than what my tax software was giving me. Definitely recommend checking it out if you're tackling S-corp returns yourself.

If you're planning to handle the S-corp returns yourself, just be aware you might need to contact the IRS with questions at some point. I tried doing that last year and was on hold for FOUR HOURS before giving up. I eventually used https://claimyr.com which was recommended by someone in my business group. They have this system where they wait on hold with the IRS for you and then call you when an agent is available. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c This saved me so much time, especially when I had questions about some S-corp reporting requirements that weren't clear in the IRS publications. I was able to keep working instead of being stuck on hold all day. Just something to keep in your back pocket if you run into issues that need direct IRS clarification.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it when I needed to call the IRS about an error on one of my husband's S-corp K-1 forms. The IRS website said the current wait time was "greater than 2 hours." Instead of wasting my afternoon, I used the service and went about my day. Got a call back about 2.5 hours later with an actual IRS agent on the line. The agent helped resolve our issue in about 15 minutes. I would have lost an entire afternoon otherwise! For anyone doing their own business taxes, this is definitely worth knowing about. I've spent countless hours on hold with the IRS over the years, and this was such a better experience.

Just want to add my two cents as someone who's been filing S-corp returns for my business for 7 years. The first year is definitely the hardest! There's a learning curve, but once you understand the basic concepts, it gets much easier. If you decide to do it yourself, make sure you understand: 1) How to allocate between reasonable salary and distributions 2) Keeping business and personal expenses separate 3) Quarterly estimated tax payments 4) Payroll tax requirements The software I use (TaxAct) actually has decent guidance for S-corps and is way cheaper than hiring an accountant. I'd say give it a try yourself first, and if you get stuck, you can always hire help for the complicated parts.

Be careful about DIY with S-corps! I tried doing mine myself last year and missed the requirement to pay myself a "reasonable salary" - took too much in distributions instead. Ended up with an IRS notice and had to pay additional self-employment taxes plus penalties. S-corps have specific rules that personal returns don't. Honestly, the money I "saved" by not hiring an accountant ended up costing me three times as much in the end.