Has anyone used TurboTax Self-Employed for this kind of situation? Would it flag this issue or just let you incorrectly deduct the W2 wages on Schedule C?

This is exactly why I always recommend consulting with a tax professional BEFORE making any major payroll decisions. That said, you're not the first person to find themselves in this situation, and there are definitely paths forward. Given the substantial income amount ($135k), I'd lean toward the S-corp election route rather than trying to deduct the wages on Schedule C. The IRS has specific procedures for late S-corp elections with reasonable cause, and "lack of knowledge of the filing requirements" is often accepted if you can document it properly. Key steps I'd recommend: 1. Have your accountant prepare Form 2553 with a detailed reasonable cause statement 2. File Form 1120S for the corporate return immediately 3. Be prepared to show you acted in good faith and are now trying to comply properly The Schedule C route is risky because those wage deductions will almost certainly trigger an audit - the IRS systems will match your SSN as both the payer and recipient of those W2s. Time is critical here since there are deadlines for the S-corp election, so work with your accountant to get this filed ASAP. The sooner you address it, the better your chances of approval.

I work in tax compliance and want to add some important context about these SETC companies that's been missing from this discussion. The Employee Retention Credit was never intended for independent contractors - it's specifically for businesses that retained employees on payroll during COVID-19. The IRS has issued Notice 2021-20 and subsequent guidance making this crystal clear. What these companies are doing is essentially filing fraudulent claims on behalf of gig workers who don't qualify. They know the claims will likely be rejected, but they collect their fees upfront anyway. The IRS has a dedicated task force now investigating these mass filings and they're treating them as potential fraud schemes. If you've already used one of these services, you should consider filing Form 8091 to withdraw your claim before the IRS processes it. This can help you avoid penalties, though you'll still need to return any refund you received. For legitimate gig worker deductions, focus on actual business expenses you can document: vehicle expenses (either mileage or actual costs), phone bills, equipment, supplies, etc. The Section 199A qualified business income deduction can also provide significant savings for self-employed individuals within certain income limits. Don't let these predatory companies turn what should be straightforward tax planning into an IRS nightmare. Stick with legitimate deductions and work with qualified tax professionals who won't put your financial future at risk for a quick commission.

This thread has been incredibly eye-opening - thank you everyone for sharing your experiences! I've been doing DoorDash and Instacart for about 8 months and have been getting non-stop ads and text messages from these SETC companies. The marketing is so aggressive that I almost convinced myself I was missing out on free money. What really struck me was the pattern everyone's describing: upfront fees, pressure to sign quickly, vague answers about eligibility, and then either rejections or audit letters later. That's classic predatory behavior targeting people who are already struggling with the complexities of self-employment taxes. I'm definitely going to follow the advice here and find a CPA who specializes in gig worker taxes instead. Even if it costs more upfront, it sounds like the peace of mind and legitimate tax savings will be worth it. Plus I'd rather not spend the next few years looking over my shoulder waiting for an IRS audit letter. For anyone else reading this who's been tempted by these offers - the consensus seems pretty clear that if you're getting 1099s and don't have employees, you almost certainly don't qualify for ERC/SETC no matter what these companies claim. Better to focus on documenting legitimate business expenses and working with real tax professionals who won't put your financial future at risk.

My case got resolved in 3 weeks but that was back in January when they weren't as swamped

Hang in there! I just went through this process last month. My TAS advocate was assigned in early December and my refund finally hit my account on January 8th - so about 5 weeks total. The key thing is that once TAS gets involved, they actually have the power to push things through that regular customer service can't touch. Make sure to respond to any requests from your advocate ASAP and keep checking your transcript like others mentioned. You're in the home stretch now!

The IRS has strict protocols about protecting whistleblower identities, but you're right to be concerned when only you and one other person know about this situation. Here's what typically happens: When the IRS processes Form 3949-A reports, they don't immediately contact the taxpayer. Instead, they first evaluate the information internally and may cross-reference it with other data sources (bank records, 1099s, etc.) to build a broader picture. This helps mask the fact that it originated from a specific tip. For cases involving $270k in unreported income, the IRS will likely take this seriously since it represents substantial tax revenue. They'll usually approach it as a "compliance examination" rather than saying they received information about the taxpayer. The initial contact would be something like "Your return has been selected for examination" rather than "We received information that you underreported income." However, given that only two people know about this situation, there's always a risk the person might deduce who reported them, regardless of how carefully the IRS handles it. The IRS can protect your identity in their processes, but they can't control what the taxpayer might figure out based on the timing and nature of the investigation. Consider whether you're prepared for that possibility before proceeding. The legal protections are there, but practical anonymity in a two-person scenario is inherently challenging.

I've been through a similar situation and understand your concerns about anonymity. The reality is that with only two people knowing about this, there's inherent risk regardless of how well the IRS protects your identity in their procedures. That said, the IRS does have solid protocols for these situations. They typically won't approach the taxpayer immediately after receiving your Form 3949-A. Instead, they'll spend months reviewing the information, cross-referencing with their databases, and often gathering additional evidence before making any contact. When they do reach out, it's framed as a routine examination rather than "someone reported you." For a case involving $270k in unreported income, they'll definitely take this seriously. The amount is substantial enough that it will get proper attention from their examination division. My suggestion would be to document everything thoroughly and consider filing under the whistleblower reward program rather than anonymously. The formal whistleblower process actually provides better protections because it goes through the Whistleblower Office, which has experience handling sensitive cases. You can also work with an attorney specializing in whistleblower cases, which adds another layer of protection through attorney-client privilege. Yes, there's a chance they might figure out it was you based on timing and circumstances, but tax fraud of this magnitude shouldn't go unreported just because of that risk. The IRS has legal obligations to protect sources, and they take those seriously.

Anyone know if turbo tax handles these SLCSP variations correctly? I have similar fluctuations on my 1095-A and I'm worried the software will mess up the calculations.

I went through this exact same nightmare last year with my 1095-A showing crazy SLCSP fluctuations. After reading through all these comments, I want to add one more thing that might help - make sure you check if your state expanded Medicaid during the coverage year. In my case, some of those $0 months were because my income temporarily dropped and I became eligible for Medicaid, which meant no premium tax credits for those months. The marketplace doesn't always make this clear on the form, so it just looks like random zeros. Also, if you're still confused after trying the suggestions here, consider reaching out to a local VITA (Volunteer Income Tax Assistance) site. They have volunteers specifically trained on ACA tax issues and can review your 1095-A for free. I found one through the IRS website and they caught an error that even my paid tax preparer missed. Sometimes having a human look at your specific situation is worth more than any online tool.