Hey Kristin! Welcome to the world of being an employer - it's definitely overwhelming at first but you'll get the hang of it. Everyone has already given you great advice about the March 12 date (it's just a statistical snapshot, not your actual filing requirement). Since you're using Gusto, I'd recommend double-checking that they're set to file your 941 automatically for you. Most payroll services offer this as part of their service, which can save you from having to worry about the filing deadlines and form preparation. If they're not handling the filing, make sure you know exactly when your Q1 form is due (April 30th) and set that reminder now. Also, don't forget that as a new employer, you might be subject to semi-weekly deposit schedules depending on your payroll amounts. Gusto should handle this automatically, but it's worth confirming so you don't accidentally miss any deposit deadlines. The deposit penalties can be pretty steep even for small amounts. You're asking all the right questions - keep it up!

Great question, Kristin! I went through the exact same confusion when I first became an employer. The March 12 date threw me off completely, but here's what I learned: You absolutely need to file Form 941 for Q1 since you had payroll in that quarter (March 17-31). The "0" on line 1 is correct because you didn't have employees during the pay period that included March 12, but you still report all wages paid from January 1 - March 31 on the rest of the form. Think of line 1 as a government headcount snapshot, while the rest of the form captures your actual tax obligations for the full quarter. This is super common for businesses that hire mid-quarter - the IRS sees it all the time. Since you're using Gusto, definitely verify whether they're filing the 941 for you or just handling deposits. Some payroll services do both, others just handle the money side. Either way, your Q1 deadline is April 30, so you've got time to get it sorted. Welcome to the employer club - it gets easier once you understand the rhythm of quarterly filings!

I'm going through this exact same situation right now! Just received my LTR 2645 C letter two days ago and immediately panicked, even though I already got my refund back in March ($2,956). Reading through everyone's experiences in this thread has been such a huge relief - I had no idea this was happening to so many people! It's absolutely mind-boggling that the IRS can successfully process returns, approve refunds, and send out payments, but then their notification system is completely disconnected sending out review letters weeks later. I was up all night googling this letter thinking I had somehow messed up our taxes or that they were going to demand the money back. Finding this community discussion with so many people in identical situations has completely changed my perspective from panic to frustration at their system incompetence. Based on all the successful call experiences shared here, I'm definitely calling first thing tomorrow morning using the number on the letter. It's annoying we have to spend time fixing their system glitches, but at least now I know what to expect and that the agents are familiar with this widespread coordination failure. Thank you to everyone who shared their experiences and outcomes - this thread has been more helpful than anything I could find on official IRS resources. Really shows how valuable community support is when dealing with government system failures!

I'm dealing with this exact same situation right now! Just got my LTR 2645 C letter yesterday and had that immediate panic response, even though we already received our refund back in February ($2,367). This entire thread has been such a lifesaver - I had no idea this was such a widespread issue! Before finding this discussion, I was convinced we had made some terrible mistake on our return or that the IRS was going to come after us for the money back. It's absolutely infuriating that the IRS can have systems sophisticated enough to process millions of returns and distribute refunds correctly, but can't manage basic coordination between their own departments. How do you successfully review, approve, and send out someone's refund, but then weeks later have a separate system sending letters saying the return needs additional review? It's like their left hand doesn't know what their right hand is doing! Reading through all the successful call experiences shared by both taxpayers and tax professionals here, I'm definitely calling first thing tomorrow morning using the direct number on the letter. It's frustrating that we have to spend our time cleaning up their system errors, but at least now I know what to expect and that the agents are very familiar with this widespread glitch. Thank you so much to everyone who took the time to share their experiences and outcomes - this community has been infinitely more helpful than anything I could find on official IRS websites. It really shows the power of community support when dealing with government system failures!

One additional consideration that might be helpful - make sure to review your S-corp election timing and any potential Section 1202 Qualified Small Business Stock (QSBS) benefits. If your LLC made the S-corp election early enough and you've held your interest for at least 5 years, you might qualify for the QSBS exclusion which could eliminate federal taxes on up to $10 million of the gain (or 10x your basis, whichever is greater). This would be even better than just avoiding the 3.8% NIIT - it could potentially eliminate the entire federal capital gains tax on your $875K gain. The QSBS rules are complex and have specific requirements around when the election was made, the type of business, and how the stock was acquired, but it's definitely worth having your accountant review this when they return. Also, since you mentioned multiple owners, each owner can potentially claim their own $10M QSBS exclusion, so the total benefit for your group could be substantial. This is one of those situations where the entity structure (LLC electing S-corp treatment) might actually work in your favor for tax planning purposes.

Looking at your situation, you're in a really strong position to avoid the 3.8% NIIT on your $875K gain. Since you've been actively involved in running the business since 2018, you almost certainly meet the material participation requirements that exempt you from NIIT. A few key points based on the great discussion above: **Material Participation** - With 6+ years of active involvement, you likely qualify under multiple tests (500+ hours annually, substantially all participation, or the 5-of-10 years test). The LLC/S-corp structure doesn't change this fundamental exemption. **Documentation Priority** - Start gathering evidence of your participation NOW: emails showing business decisions, calendar entries, meeting minutes, travel records, contracts you signed, etc. Even without perfect hour logs, multiple types of evidence showing consistent involvement will be convincing. **QSBS Potential** - This could be huge! If your LLC made the S-corp election early and you've held your interest since 2018, you might qualify for Section 1202 QSBS exclusion. This could eliminate federal taxes on your entire $875K gain (not just the 3.8% NIIT). Given the potential $131K+ in tax savings, consider having your accountant prioritize this analysis even if they're on vacation. **Next Steps** - Gather all formation documents, S-corp election paperwork, and ownership records. Document your business activities timeline. If QSBS doesn't apply, the material participation exemption alone should save you about $33K in NIIT. With the sale in 6 weeks, time is critical but you have multiple strong paths to significant tax savings. This is definitely worth expediting professional review!

As an international filer who's been through this exact SBTPG funded status situation, I can tell you that you're basically home free at this point! The funded status with trace number means the IRS has already sent your money to SBTPG and they've initiated the transfer to your bank. Since you're filing from abroad, here's what I learned from my experience: • The trace number is crucial for international transfers - your bank may ask for it to verify the source of funds • Expect 2-4 business days for the money to hit your international account (slightly longer than domestic due to additional banking verification) • Some international banks automatically hold large government transfers for 24-48 hours as a fraud prevention measure • The SBTPG system is very reliable once it shows funded - I've never seen anyone not receive their money after reaching this status I'd recommend calling your bank's international transfer department to give them a heads up that you're expecting a US tax refund. This can prevent unnecessary holds or delays. Also, keep that trace number handy - it's basically your receipt that proves the transaction is legitimate. The waiting is the hardest part, but you're literally days away from having your refund! The system works, it's just a matter of letting the international banking process complete. 🎯

As someone who's been filing internationally for several years now, I can definitely confirm what others have said - the SBTPG funded status with trace number is fantastic news! You're essentially at the finish line of this process. A few additional insights from my experience: • The trace number is actually part of the ACH (Automated Clearing House) system and serves as a unique identifier for your specific transaction as it moves through the banking network • For international accounts, I've consistently seen 2-4 business days from funded status to deposit, with the extra time being due to correspondent banking relationships and additional compliance checks • Your bank may actually appreciate you being proactive about the incoming transfer - large government payments can sometimes trigger automated fraud alerts, so giving them advance notice can smooth the process Since you mentioned filing from abroad, one thing I'd add is to check if your bank has any specific requirements for receiving US government transfers. Some international banks have additional KYC (Know Your Customer) procedures for tax refunds above certain amounts. The bottom line is that once SBTPG shows funded with a trace number, the money is in motion and virtually guaranteed to arrive. The hardest part is just waiting for the international banking system to do its thing. You should have your refund very soon! 🌎💰

I went through this exact same confusion when I started my S Corp two years ago! Your accountant is absolutely correct - S Corps do need to issue 1099-NECs to qualifying service providers, but the key word is "qualifying." Here's what helped me sort through the maze: Start by understanding that you DON'T need to issue 1099s to corporations, LLCs taxed as corporations, or for payments made via credit card/third-party processors. This eliminates a lot of vendors right off the bat. For your entertainment industry expenses like hair/makeup, these can absolutely be legitimate business deductions if they're specifically for performances, auditions, or professional appearances. Just make sure you can document the business purpose - I keep notes linking each service to specific gigs or professional events. The W-9 collection process gets easier once you establish it as standard practice. I now require W-9s before making any payments over $100 to new vendors. Most professionals understand this is normal business procedure, though some personal service providers might need a gentle explanation about why you need their tax info. Don't feel bad about not knowing this initially - the entertainment industry is notorious for informal payment practices, but as an S Corp you need to follow corporate tax rules. It's a learning curve but you'll get the hang of it!

I'm just starting my S Corp journey too and this thread has been incredibly helpful! I was literally panicking yesterday when my accountant handed me a similar list of vendors who need 1099s. One thing I'm still confused about - if I paid someone like $400 in cash for makeup services throughout the year but then also Venmo'd them $300 for additional work, does that $700 total mean they need a 1099? Or since the Venmo portion might be handled by the payment processor, do I only count the cash payments toward the $600 threshold? Also, for those of you who've been through this process - how far back do you typically keep records of these vendor payments? I'm trying to organize everything for this year but also wondering if I should be worried about prior years before I had the S Corp set up. Thanks for sharing all your experiences - it's making this whole learning curve feel way less intimidating!