I think the key issue here is that you need complete transparency and documentation of how these tax distributions are calculated. While it's true that your partner may legitimately owe more taxes due to being in a higher bracket, the current setup sounds problematic from an accountability standpoint. Here's what I'd recommend: First, request detailed calculations showing exactly how much of each person's total tax liability is attributable to the LLC income versus other sources. Second, establish a formal policy for tax distributions in writing - many partnerships use a formula where distributions are made based on each member's estimated tax rate multiplied by their share of business income. Most importantly, consider changing your process so that tax distributions go to each partner individually, and then you each pay your own taxes. Having one person write checks directly from the business account to cover their personal tax obligations creates unnecessary confusion and potential for disputes. You should also verify that you're both getting the same K-1 amounts - if you're truly 50/50 partners, your Schedule K-1 forms should show identical income allocations. If they don't, that's a red flag that needs immediate attention. The fact that your friends and family think something's off suggests your instincts are right to question this arrangement, even if the underlying tax principles are legitimate.

Your situation highlights a really common issue with LLC partnerships - the tax implications can be vastly different for each partner even when profits are split equally. What you're describing could very well be legitimate, but the lack of transparency is the real problem here. From what you've shared, your partner's higher tax withdrawals could be justified if she's in a significantly higher tax bracket due to her $125k day job income. When LLC profits "pass through" to your personal returns, someone earning $125k + LLC profits might pay 32% federal tax on that business income, while someone earning $32k + LLC profits might only pay 12-22%. Add in the 15.3% self-employment tax that you both pay, and the difference becomes substantial. However, you absolutely have the right to understand exactly how these calculations work. I'd recommend: 1. Ask to see both of your Schedule K-1 forms side by side - they should show identical income allocations if you're truly 50/50 partners 2. Request a breakdown showing how much of each person's total tax bill is specifically attributable to the LLC income 3. Consider amending your operating agreement to include a formal tax distribution policy with clear calculation methods 4. Change your process so tax distributions go to each partner individually rather than having one person pay taxes directly from the business account The meeting with her accountant is a great idea, but go in prepared with specific questions about the calculations. If everything is legitimate, there should be complete transparency about how the numbers work.

Has anyone dealt with a situation where they rented out part of their house during the ownership period? I'm in a similar situation as OP but I rented out my basement for about 4 years of the 15 I've owned my house. Not sure how that affects the capital gains exclusion.

Just wanted to add another important consideration for your situation with your son on the deed - make sure you understand the "lookback" rule if you're planning to sell in 2026. If your son was added to the deed for estate planning purposes but hasn't met the 2-year ownership requirement yet, you might want to time the sale strategically. For example, if he was added to the deed in early 2024, he'd meet the ownership test in early 2026. Combined with the use test (if he's been living there), this could make a significant difference in your tax liability. Also, since you mentioned you've lived there 18 years continuously, you definitely meet both tests for the full exclusion. Just make sure to keep good records of when your son was added to the deed and his residency status to properly calculate each person's eligibility when you file.

Just wanted to add my experience since I was in almost the exact same situation last year! I was buying a vintage Rolex and had the same panic about wire transfers and IRS reporting. After doing tons of research and talking to my bank, here's what I learned: You're absolutely right to keep good records, but you don't need to stress about special reporting. The wire transfer itself isn't something you report to the IRS - that's all handled automatically by the banks. What really helped calm my nerves was keeping a simple paper trail: I saved the wire transfer confirmation, the purchase receipt, and a brief note in my files about what the transfer was for. My banker told me this was more than sufficient for any future questions. The jewelry store also gave me a detailed invoice that clearly showed the purchase amount and payment method. Between that and my bank records, everything was perfectly documented without any special forms or reporting on my end. One tip: ask your bank about any wire transfer fees beforehand. Mine charged $25 for domestic wires, which wasn't a big deal given the purchase amount, but it's good to know upfront. The whole process was actually much smoother than I expected once I got past the initial anxiety!

As someone who works in banking compliance, I can confirm what others have said - you don't need to personally report the wire transfer to the IRS. The Bank Secrecy Act requires us (the banks) to file Currency Transaction Reports for certain large transactions, but that's our responsibility, not yours. What you should know is that wire transfers over $3,000 are already tracked by banks through the Bank Secrecy Act, and transfers over $10,000 trigger additional reporting requirements - but again, all handled by the financial institutions involved. Your main job is just to keep good records for your own files. Save the wire transfer receipt, the purchase invoice from the jewelry store, and maybe a simple note about what the purchase was for. This documentation will be helpful if you ever need to explain the transaction for any reason (insurance claims, future sales, etc.). The jewelry store will likely file Form 8300 since they're receiving over $10,000, but that's standard business practice for them. You're just making a legitimate purchase with legally earned money - there's nothing suspicious or reportable about that from your end. One practical tip: call your bank ahead of time to let them know about the large wire transfer. Some banks will put a temporary hold on unusual activity, so giving them a heads up can prevent any delays or complications on the day you want to make the purchase.

The compensation structure suggestion is actually quite dangerous from a compliance perspective. The IRS has specific guidelines for S-corp reasonable compensation, and salary amounts should be based on the actual work performed and market rates for those roles, not manipulated to achieve desired cash flow outcomes. If both partners perform similar roles and have similar responsibilities, having significantly different salaries ($55k vs $75k) without legitimate business justification could be seen as tax avoidance. The IRS could reclassify the lower salary as inadequate compensation and treat some of that partner's distributions as wages subject to payroll taxes. A safer approach would be to maintain proportional distributions as required, then use properly documented shareholder loans or capital contributions after distributions are made. This keeps you compliant with S-corp rules while achieving your goal of keeping more money in the business. I'd strongly recommend getting this strategy reviewed by a tax professional who specializes in S-corps before implementing any compensation changes.

I've been dealing with a similar situation in my S-corp and wanted to share what I learned from working with our tax attorney. The key insight is that S-corp distributions must be proportional to ownership, but there are legitimate ways to achieve your goal of keeping more money in the business while your partner takes more home. Here's what we ended up doing: Both partners take the required proportional distributions (in your case, that would be equal amounts since you're 50/50 owners). Then, after receiving your distribution, you can make a shareholder loan to the company for the amount you want to keep in the business. The critical part is proper documentation - you'll need a promissory note with market-rate interest, a realistic repayment schedule, and corporate resolutions authorizing the loan. This keeps everything above board and gives you legal recourse to get your money back. One thing to consider is that as a creditor (through the loan), you'd have different rights than if you made a capital contribution. If the business struggles, loan repayment typically has priority over distributions to shareholders. This might actually be preferable if you're concerned about protecting the money you're putting back into the business. Just make sure to work with a tax professional who understands S-corp rules - the documentation requirements are important for maintaining your S-corp status.

I found out the hard way that even if the broker doesn't report it, the IRS can still come after you! I had some old IBM stock from my grandpa that I sold in 2022, and the gain wasn't reported by my broker. I thought "cool, free money" and didn't include it on my taxes. Got a CP2000 notice six months later saying I owed taxes plus penalties and interest. The broker not reporting it to the IRS doesn't mean the IRS won't find out eventually, especially if the amounts are substantial. Better to report everything properly the first time!

This is such an important topic that catches so many people off guard! I went through the exact same confusion last year with my Schwab account. One thing I'd add to the great advice already given is to keep really detailed records of ALL your transactions, especially the ones not reported to the IRS. I started using a simple spreadsheet to track purchase dates, sale dates, and cost basis for everything - even when my broker has the info. This saved me so much time during tax prep. Also, if you're dealing with inherited securities or stocks transferred from another brokerage, those are prime candidates for being "not reported to IRS" on your 1099-B. The receiving broker often doesn't have the original purchase information needed for proper cost basis reporting. One last tip - if you're unsure about any complex transactions, consider getting help from a tax professional for this year. The cost is usually worth it to avoid potential penalties down the road, and you'll learn the process for handling it yourself in future years. Tax compliance stress is real, but you're asking the right questions!