As someone who went through a similar manufacturing business acquisition two years ago, I can't stress enough how important it is to get your tax strategy locked down before closing. Here are some key points from my experience: For your $1.3M deal, definitely push for an asset purchase structure. Yes, the seller will likely want more money to compensate for their higher tax burden, but the step-up in basis you'll get is worth negotiating for. In my case, we ended up paying about $50k more than the initial asking price, but the additional depreciation benefits more than made up for it. Regarding the immediate expensing question - you're looking at a combination of strategies. With $1.3M in assets, you'll likely have substantial equipment that could qualify for Section 179 expensing (up to $1.16M for 2024) and potentially bonus depreciation. However, as others mentioned, you can't exceed your taxable income from all sources. One thing I wish I had known: manufacturing equipment often has shorter depreciation lives than you might expect. Some specialized machinery qualifies for 3-5 year depreciation schedules rather than the standard 7 years. Make sure your appraiser understands the specific equipment types in your target business. Also consider the working capital component carefully. In manufacturing, inventory and receivables can be substantial. These affect your cash flow at closing but also your ongoing tax planning. My biggest recommendation: engage a tax professional who specializes in business acquisitions BEFORE you finalize terms. The purchase agreement language around asset allocation is crucial and much harder to fix after signing.

Great thread with lots of valuable insights! I went through a similar manufacturing acquisition in 2023 and want to add a few points that might help. First, regarding your $1.3M purchase price - one strategy that worked well for me was negotiating a "true-up" mechanism in the purchase agreement. We agreed on preliminary asset allocations but included language allowing for adjustments based on final appraisals completed within 90 days of closing. This gave me time to get proper valuations while still moving forward with the deal. For the manufacturing equipment specifically, don't overlook the potential for bonus depreciation on used equipment. The Tax Cuts and Jobs Act allows 100% bonus depreciation on qualified property (including used equipment) placed in service through 2022, and it's being phased down but still substantial through 2026. This could be huge for your cash flow in year one. Also, since you mentioned this is a 15-year-old company, pay attention to any environmental compliance equipment (scrubbers, waste treatment systems, etc.). These often qualify for accelerated depreciation and sometimes even environmental tax credits that can offset your acquisition costs. One mistake I almost made - be very careful about how you handle any assumed contracts or leases. Equipment leases, in particular, can affect your depreciation calculations if they're treated as capital leases vs operating leases under the new lease accounting standards. Finally, consider whether the business qualifies for any state-level manufacturing incentives or property tax abatements that could improve your overall return on the acquisition. Many states offer significant breaks for manufacturing businesses that you'll want to preserve post-closing.

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!