Quick question - does anyone know if the 6% excise tax on excess contributions continues to apply each year until you withdraw the excess? I just discovered I've had an excess HSA contribution sitting there for 2 years!

I went through this exact same situation last year with a $2,000 HSA overcontribution that I kept in cash. The IRS guidance is actually pretty clear on this - you only need to calculate earnings on what the excess contribution actually earned, not use the complex formula when the funds were segregated. Since your $1,650 was sitting in cash at 0.01%, your earnings calculation is straightforward: $1,650 × 0.0001 = about $0.17 for the year (assuming it was there the full year). That's the amount you'd need to withdraw along with the $1,650 excess. The complex formula everyone mentions is only required when excess contributions are commingled with investments and you can't directly trace the specific earnings. Since you kept yours separate in cash, you're in the clear with the simple calculation. Make sure to request a "return of excess contributions" from your HSA provider (not a regular distribution) and complete Form 5329 to report any excise tax owed for the time the excess remained in your account. Better to fix it now than let that 6% annual excise tax keep accumulating!

Your state filing requirements might be more urgent than the federal stuff tbh. What state are you in? Many states require you to file an amendment to your Articles of Organization within 30-90 days of an ownership change. Missing these deadlines can result in administrative dissolution of your LLC in some states.

Great thread everyone! As someone who went through a similar LLC partner buyout situation last year, I wanted to add a few practical tips that helped me navigate the process: First, don't underestimate the importance of getting your partnership agreement updated ASAP to reflect the new ownership percentages. This document will be crucial for your tax filings and any future business decisions. Second, consider whether you want to make the Section 754 election that was mentioned earlier. In our case, we consulted with a CPA who ran the numbers and showed us it would save about $3,000 annually in taxes due to higher depreciation deductions. The election has to be made with your return for the year of the buyout, so you can't go back and do it later. Finally, make sure you're clear on how to handle the departing partner's guaranteed payments (if any) and their share of partnership liabilities. These details can get messy if not properly documented during the buyout process. One more thing - keep detailed records of all payments made to the departing partner. The IRS may want to see proof that the payments were properly characterized (capital distribution vs. payment for services, etc.). This becomes especially important if the amounts are significant. Good luck with your filing! The partnership tax rules are complex but definitely manageable with proper planning.

Quick warning from someone who's been audited over this exact issue - if your equipment rental income is substantial compared to your service income, the IRS might challenge whether it's genuinely "rental" or just part of your service business. For example, if you charge $500 for your services and $2000 for equipment on the same job, that might raise flags. If you're regularly in the business of renting equipment (even to people who don't hire your services), that strengthens your position. Make sure you have documentation showing fair market value for your equipment rentals. Having rate sheets showing standard pricing helps. Also document maintenance costs, depreciation, and other expenses associated with the equipment ownership separately from your service business expenses.

This is such a common issue in our industry! I'm a lighting technician who also rents out my LED panels and control boards. I've been dealing with the same frustrating situation where some companies just don't want to be bothered with issuing separate forms. One thing that's helped me is creating a simple template email I send to accounting departments right after completing a job. I include the invoice breakdown and explicitly request they issue separate forms - one 1099-NEC for my technical services and one 1099-MISC for equipment rental. I send this within a week of the job while it's still fresh in their system. I also started requiring a deposit specifically for equipment rental at booking, which creates a clearer paper trail showing the rental component is separate from services. This has made it much easier when I need to demonstrate to the IRS that these are truly distinct income streams. The tax savings really do add up - last year I saved about $2,800 in self-employment taxes by properly categorizing my rental income. It's definitely worth the extra effort to get this right!

Quick tax tip - if your total non-cash donations for the year exceed $500, you MUST file Form 8283 with your return. I learned this the hard way and got a letter from the IRS about my kitchen donation.

Great advice from everyone here! Just wanted to add that you should also keep detailed records of your donation process. I recommend taking timestamped photos of the items before donation, getting measurements, and noting any defects or wear patterns. When I donated my kitchen items last year, I created a simple spreadsheet with each item, its condition, measurements, and my estimated value with notes on how I determined that value (comparable sales, age, condition factors, etc.). This documentation was invaluable when preparing my taxes. Also, don't forget to factor in installation costs when researching comparable values - cabinets that are easy to remove and reinstall are worth more than custom built-ins that would require modification. Since yours are being picked up by Habitat, they're likely standard sizes which helps maintain their value. One last tip: if your total donation value approaches $5,000, consider getting a professional appraisal. It costs money upfront but can save you major headaches if the IRS questions your valuation later.

This is really comprehensive advice everyone! As someone who's been through the LLC to S Corp transition myself (different industry though), I'd add one more consideration specific to insurance agents - the potential impact on professional liability insurance costs. When I was researching this for my own business, I discovered that some E&O insurance carriers have different premium structures or coverage requirements based on your business entity type. Since E&O insurance is mandatory for insurance agents and can be a significant expense, it's worth checking with your current carrier before making the S Corp election to ensure there won't be any surprises. Also, @Diego, given that your friend is brand new to the industry, he might want to focus on establishing consistent sales processes and building his client base first before getting bogged down in tax optimization strategies. The administrative burden of S Corp compliance (payroll, quarterly filings, etc.) can be a real distraction when you're trying to learn the ropes of a new business. Once he's got a solid foundation and predictable income flow, then the S Corp election becomes much more straightforward to evaluate. The $100k threshold everyone's mentioning is solid, but having consistent monthly income patterns is almost as important as hitting that dollar amount.

Great discussion everyone! I'm a CPA who specializes in small business taxation, and I've worked with quite a few insurance agents over the years. One aspect I'd add to consider is the timing of the S Corp election itself. If your friend decides to go this route, he needs to file Form 2553 within 75 days of forming the LLC (or by March 15th of the tax year he wants the election to take effect). Missing this deadline means waiting until the following tax year. Given that he's brand new, I'd actually recommend he start with the LLC and focus on understanding his business cash flows first. Insurance agents often have irregular income patterns - big commission months followed by slower periods. This irregularity makes it harder to manage the required payroll obligations that come with S Corp status. Also, since he's solo right now, he should consider whether he plans to hire employees eventually. If so, the S Corp structure might make more sense down the road when he has multiple people to manage payroll for anyway. But for a true solopreneur, the added complexity often isn't worth it until that $100k threshold that others have mentioned. The key is having enough consistent income to justify both the additional accounting costs AND the required regular salary payments to himself as an employee of his S Corp.