For your truck question - be SUPER careful here. I made a $19k mistake my first year in business by assuming I could just deduct a vehicle purchase 100%. If you're using the vehicle EXCLUSIVELY for business (like, literally never for personal use), you might be able to deduct the full amount under Section 179. But if you use it for personal stuff too (even occasionally), you can only deduct the business-use percentage. Also, SUVs and trucks over 6,000 lbs have different rules than smaller vehicles. Make sure you know which category yours falls into!

Hey Vince! Congrats on your business success so far - that's awesome that it's doing better than expected! Just to add to the great advice already shared here: since you're only 4 months in, you're actually in a perfect position to set up good tax habits from the start. The quarterly payment system everyone mentioned is definitely the way to go, and you're not too late to start. For your $26k truck scenario - the key thing is documentation. Keep a detailed log of every business trip (date, destination, business purpose, mileage). If you use it for any personal driving, calculate that percentage because the IRS will want to see those numbers if they ever audit. One more tip that saved me in my first year: open a separate business savings account specifically for taxes. Every time you get paid, immediately transfer 25-30% into that account. It makes quarterly payments so much less stressful when the money is already set aside and earmarked for taxes. You're asking all the right questions - way better to figure this out now than scramble at tax time!

This thread has been incredibly helpful! I'm dealing with a very similar situation with my web design business. I started as a sole prop, got an EIN for client W9s, then formed an LLC but kept it as a disregarded entity. PayPal required the LLC's EIN for their business account setup, so now I have two EINs just like the OP. Reading through all these responses, it sounds like the consensus is pretty clear - keep using the sole prop EIN on tax forms and W9s, and don't worry about the 1099-K having the different EIN. The explanatory statement approach mentioned by several people here seems like the smart way to handle it. One thing I'm curious about though - has anyone actually had the IRS question or audit them specifically because of this EIN mismatch situation? All the advice here makes sense logically, but I'm wondering if there are any real-world examples of this causing problems down the road, or if it really is as straightforward as everyone is saying. Also, for those who mentioned contacting the IRS directly about this - did you call the general taxpayer assistance line, or is there a specific department that handles business EIN questions?

I've been through this exact same scenario with my consulting LLC and can confirm what others have said here - you're absolutely on the right track with your thinking! The key thing to remember is that even though you're operating as an LLC, the IRS still sees you as a sole proprietor for tax purposes since it's a disregarded entity. So yes, continue using your original sole prop EIN (11-1111111) on your Schedule C and any W9 forms you fill out. When that 1099-K comes in from Square with your LLC's EIN (22-2222222), just report that income on your Schedule C like any other business income. The IRS won't have any issues with this - their systems can cross-reference both EINs to your SSN. I'd definitely echo the advice about including an explanatory statement with your tax return. Something simple like: "Taxpayer operates [LLC Name] as a single-member LLC taxed as a sole proprietorship. Income reported on 1099-K forms under EIN 22-2222222 is included in Schedule C business income reported under EIN 11-1111111." This just gives the IRS a clear paper trail if anyone ever reviews your return. The situation you described with Square requiring the LLC's EIN is super common - payment processors often have strict verification requirements that don't align perfectly with tax reporting rules. But that's totally fine as long as you're consistent on the tax side of things. You're definitely not in a "paperwork mess" - this is actually a pretty standard situation that lots of single-member LLC owners deal with!

Don't stress too much about this! I accidentally selected "retail" for my SAAS business two years ago and it's never caused any issues. The business category on the EIN application isn't as critical as people make it out to be. The IRS cares more about accurate income reporting than the specific category you select during application.

Great question! I went through this exact same process last year for my SaaS startup. After researching extensively and consulting with my accountant, I selected "Service" for our EIN application. The reasoning is that SaaS businesses are fundamentally providing ongoing access to software functionality rather than selling a tangible product. Even though customers "purchase" subscriptions, what they're really buying is continuous access to your service platform. This puts it squarely in the service category rather than retail, which is typically reserved for businesses selling physical goods or one-time software purchases. The IRS views subscription-based software access as a service offering, similar to how they'd classify other subscription services like consulting or cloud hosting.

One thing I haven't seen mentioned yet is the importance of documenting your correction process thoroughly. Keep detailed records of every amended return filed, every payment made, and all correspondence with the IRS. This documentation becomes crucial if there are any disputes later or if the IRS has questions about your corrections. Also, consider requesting penalty abatement letters for each tax year once you've filed the corrections and made payments. The IRS sometimes grants relief for reasonable cause, especially when businesses proactively correct mistakes. Your cooperation in fixing this voluntarily could work in your favor. For the partner who was incorrectly paid through payroll, make sure they understand they'll need to file amended individual returns (1040X) for each affected year. The timing matters here - generally you have 3 years from the original due date to amend and claim refunds, so depending on when those original returns were filed, some years might be getting close to that deadline. Finally, once this is all corrected, establish proper ongoing procedures to prevent this from happening again. Set up quarterly partnership meetings to review tax obligations and consider working with a bookkeeper or accountant who understands partnership taxation.

I went through a very similar situation with my LLC about 18 months ago. We had the same setup - multi-member LLC treated as partnership, but one partner was being paid through payroll for about 3 years while we never filed a single 1065. Here's what I learned from the correction process: **The good news:** The IRS was actually pretty reasonable when we proactively came forward to fix it. We used the Voluntary Classification Settlement Program (VCSP) which significantly reduced our penalties. **The process we followed:** 1. Filed all missing 1065s simultaneously with a detailed cover letter explaining the situation 2. Issued corrected K-1s to the partner who was on payroll 3. Filed amended 941s to remove the partner from payroll 4. The partner filed 1040X returns for each year to report the income correctly **What surprised me:** The partner actually came out ahead in one of the years due to the Section 199A deduction they qualified for as a partner but couldn't claim as an employee. The additional self-employment tax was painful, but the overall tax picture wasn't as bad as we feared. **My advice:** Don't wait any longer to start this process. The penalties keep accruing, and you're getting close to statute of limitations issues for some potential refunds. Also, consider hiring a tax professional who specializes in partnership corrections - it was worth every penny for the peace of mind and to make sure we didn't miss anything. The whole correction took about 8 months to fully resolve, but we were able to set up payment plans for the additional taxes owed. It's definitely stressful, but very fixable!

Great discussion here! I work as a tax preparer and want to emphasize a few key points for anyone in similar situations: 1) Keep ALL receipts and contracts - the IRS may want to see the full paper trail if audited 2) Document the "before" condition - photos of the failing systems can help prove these were necessary improvements, not optional upgrades 3) Consider getting a professional appraisal if your improvements are substantial (over $25K) - this can help establish the added value For the original poster, since you're married filing jointly and this was your primary residence, you're definitely covered by the $500K exclusion. But having proper documentation is still crucial for peace of mind and potential future property sales. One more tip: if you used any financing for these improvements (loans, credit cards, etc.), the interest payments generally can't be added to basis, but the principal amounts can be.

This thread has been incredibly informative! I'm actually in a very similar situation - we installed a new septic system ($19,000) and upgraded our well pump system ($8,500) about 18 months ago on our primary residence. One thing I wanted to add that I learned from our county health department: they actually keep records of all septic permits and inspections, so even if you've lost some paperwork, you can often get copies of the official documentation from your local permitting office. This was a lifesaver for us when we needed proof that our old system had failed inspection. Also, for anyone dealing with well improvements, check if your state has a well registration database. Many states maintain records of well installations and major repairs that can serve as additional documentation for the IRS. It's reassuring to know that even though most of us probably qualify for the primary residence exclusion, having all this documentation properly organized will be valuable for any future property transactions!