This has been such an educational thread! As someone new to S-Corp taxation, I really appreciate how everyone broke down the interconnected pieces between the 1120-S, Schedule K, K-1, and Schedule L. I wanted to share something that might help other newcomers - I've been creating a simple flowchart that traces how each transaction flows through the different forms and schedules. For the scenario described: • Business income $135,000 → 1120-S income section → flows to Schedule K → allocates to K-1 Line 1 as ordinary income • Officer salary $52,000 → 1120-S Line 7 (reduces ordinary income) → creates payroll tax obligations • Distribution $26,000 → Schedule K Line 16d → K-1 Line 16 (affects basis, not income) • Net cash increase $57,000 → Schedule L assets → balanced by retained earnings increase Creating this visual map has really helped me understand how everything connects. The basis tracking spreadsheet idea mentioned earlier is brilliant too - I'm definitely implementing that for all my S-Corp clients going forward. One thing I'm curious about - for quarterly estimated payments, should those be based on the net ordinary income after officer compensation ($83,000 in this example), or does the shareholder need to consider other factors when calculating their estimates? Thanks again to everyone who shared their expertise - this is exactly the kind of practical guidance that makes the difference between textbook knowledge and real-world competence!

This thread has been incredibly helpful! As another newcomer to S-Corp taxation, I'm finding the practical advice here invaluable. The explanations about how officer compensation flows through the forms and affects Schedule L really clarified things for me. I wanted to add one observation from my recent experience - when I was struggling with similar Schedule L balancing issues, I found it helpful to think of the balance sheet as a "snapshot" of what the company owns and owes at year-end, separate from the income statement activity. The $57,000 cash increase represents the actual cash that stayed in the business after paying salary and distributions. One question that came up for me - if the S-Corp had made any loan payments during the year (principal portion), would those show as a reduction in both cash and notes payable on Schedule L, similar to how the loan origination would increase both? I want to make sure I understand how debt transactions affect the balance sheet versus income statement. Also, the emphasis on reasonable compensation documentation throughout this thread is a great reminder. I've started creating a simple template that includes job duties, hours worked, education/experience, geographic market data, and industry comparables. Having this framework makes it much easier to justify compensation decisions consistently across different clients. Thanks to everyone for sharing such detailed, practical insights. This is exactly the kind of real-world guidance that helps bridge the gap between theory and practice!

The arrangement you're describing is totally fine and very common! Health insurance coverage and tax dependency are governed by completely separate rules, so there's no conflict with your girlfriend having your son on her insurance while you claim him as your dependent. For the IRS dependency test, what matters is that you provide more than half of your son's total support for the year and that he lives with you for more than half the year (which is satisfied since you live together). The fact that he's on her health insurance doesn't affect your ability to claim him as a dependent at all. Your employer's childcare subsidy program will only verify that you legitimately qualify to claim your son as a dependent on your tax return - they won't even know or care whose health insurance he's on. These are completely separate benefit systems. Just make sure you keep good documentation of all the expenses you pay for your son (formula, diapers, clothes, toys, childcare costs, medical expenses not covered by insurance, etc.) to prove you're providing more than half his support. This will be important if you're ever audited or questioned about your dependent claim. Also coordinate with your girlfriend to ensure you don't both try to claim him - only the person who actually provides more than half the financial support should claim the dependency exemption. But based on your question about wanting the work subsidy, it sounds like you're planning to be the primary financial provider, which would make you the correct person to claim him. Congratulations on the upcoming addition to your family!

Welcome to the parenthood club! This is actually a pretty straightforward situation once you understand how the systems work. The key thing to remember is that health insurance eligibility and tax dependency are completely separate matters governed by different rules. Your girlfriend can absolutely add your son to her family health plan while you claim him as your tax dependent - there's no conflict there whatsoever. For your work's childcare subsidy, they're only concerned with whether you legitimately qualify to claim your son as a dependent according to IRS rules. The main tests are: 1) You provide more than half of his total financial support for the year, 2) He lives with you for more than half the year (easy since you live together), and 3) He meets the relationship test (which he does as your biological child). Your employer won't even know whose health insurance covers your son unless you specifically tell them - that information isn't part of their verification process for the childcare benefit. My advice: Start keeping detailed records of all expenses you pay for your son from birth (formula, diapers, clothes, medical copays, childcare, etc.). This documentation will be crucial if you're ever questioned about providing majority support. Also make sure you and your girlfriend are on the same page about who claims him - only one parent can claim the dependency exemption, and it should be whoever actually provides more than half the financial support. You're going to do great as a new dad, and it sounds like you're already thinking ahead about the financial aspects - that's smart planning!

I went through something similar with about $35K in tax debt from my consulting business. The IRS was actually more reasonable than I expected when I finally worked up the courage to call them directly. What really helped me was getting organized BEFORE calling. I gathered all my financial documents - bank statements, monthly expenses, pay stubs, etc. The IRS agent walked me through their Collection Information Statement (Form 433-F) over the phone, which calculates how much you can realistically pay based on your income minus necessary living expenses. The whole process took about 3 weeks from my first call to getting the official payment agreement in writing. The agent was professional and actually seemed to want to help me find a solution rather than just collect money. I ended up with a 6-year payment plan at $425/month, which was way better than the $8,000 the tax relief company wanted upfront just to "evaluate" my case. My biggest advice: don't be intimidated by calling the IRS. Yes, the hold times are brutal, but the agents are generally reasonable if you're honest about your situation and show you're trying to comply. Those tax relief companies prey on fear, but the IRS has programs available that you can access yourself with some patience and preparation.

I can share my experience from dealing with a similar situation. I owed about $24,000 in back taxes from 2021-2022 and was getting those same aggressive marketing calls and mailers promising to settle for "pennies on the dollar." After reading through all these responses, I decided to skip the tax relief companies and go directly to the IRS. It took me 4 attempts over 2 weeks to finally get through to someone, but once I did, the agent was surprisingly helpful and patient. The key thing I learned is that the IRS has standard programs available to everyone - you don't need to pay someone thousands to access them. I qualified for an installment agreement at $320/month over 8 years, and they also approved first-time penalty abatement which reduced my total debt by about $3,200. What really struck me was how straightforward the process was once I actually talked to the IRS. No mysterious negotiations or special connections needed - just honest communication about what I could afford based on my actual financial situation. Those tax relief companies aren't necessarily scams, but they're charging premium prices for services you can get for free directly from the IRS if you're willing to be patient and persistent. Save your money and deal with the source directly - the IRS agents are real people who generally want to help you find a workable solution.

I just went through this exact same process last month for my LLC's late filing penalty! You're definitely on the right track with selecting "Balance due on return or notice" - that's the correct option for penalty payments. The warning message about the tax period being out of the usual range is completely normal when you're paying an older penalty. Don't let it scare you - just click "Continue" and proceed with the payment. The system shows this warning for any tax year that's not the current or immediately previous year. A few tips from my experience: - Make sure you're logged into EFTPS with your LLC's EIN, not your personal SSN - In the reference field, enter something like "Form 1065 Late Filing Penalty 2019" to make it crystal clear what the payment is for - Print or save the confirmation page - you'll want that reference number - The payment typically processes within 1-2 business days The $2,600 amount sounds about right for a multi-year late filing penalty. Once you submit the payment, you can check your account transcript online in about a week to confirm it was applied correctly to your penalty balance.

I actually just went through this exact same situation with my LLC's 2019 Form 1065 late filing penalty a few weeks ago! You're absolutely doing it right - "Balance due on return or notice" is the correct selection for penalty payments. That warning message about the tax period being out of range is totally normal and expected when paying penalties for older tax years. The IRS system just wants to make sure you're intentionally paying for an older period. Go ahead and click "Continue" - it won't cause any issues. A couple of things that helped me get through the process smoothly: - Double-check that you're logged into EFTPS using your LLC's EIN (not your personal SSN) - In the payment reference field, I wrote "Form 1065 Late Filing Penalty - Tax Year 2019" which made it very clear what the payment was for - Keep a screenshot or printout of your confirmation page for your records The payment should process within 1-2 business days, and you can verify it was applied correctly by checking your business account transcript online after about a week. With a $2,600 penalty amount, you definitely want to make sure everything goes smoothly - but following these steps should get you there without any problems!

I went through this exact same frustrating situation with my New York return just a few weeks ago! After trying everything suggested in this thread (and huge thanks to everyone for all the detailed advice), I wanted to share what finally worked for me since it might help others. I called the NY tax department first thing in the morning and got through in about 30 minutes. The rep gave me the specific reject code and said it was due to a "dependent verification mismatch." Turns out I had entered my daughter's date of birth as 2019 on the state return but 2018 on federal (where it was correct). Such a tiny typo but it completely blocked the state filing. The really helpful part was that New York allowed me to make the correction and resubmit electronically after waiting 24 hours - I didn't have to mail anything! I fixed the birth date, waited a day, resubmitted through TurboTax, and it was accepted immediately. So definitely call Michigan and get that specific reject code, but also ask about electronic resubmission options. Many states allow this for simple data entry errors, which could save you weeks of waiting for paper processing. Sometimes what feels like a huge problem is just one mistyped digit that's easily fixable once you know what to look for. Don't give up - there's definitely a solution hiding in there somewhere!

I just wanted to follow up on this thread since I've been dealing with a similar issue in California. After reading through everyone's incredibly helpful advice, I tried the early morning call strategy and actually got through to the CA Franchise Tax Board in under 45 minutes! The rep was able to give me the specific reject code (R0000-503-01) and explained that my return was rejected because I had claimed the California Earned Income Tax Credit but hadn't included a required supporting schedule that's separate from the federal EITC forms. TurboTax had calculated the credit correctly but somehow missed generating the CA-specific form. What's really interesting is that this rejection had nothing to do with data entry errors or mismatched information - it was purely a missing form issue that only applied to California's requirements. The federal return processed fine because the IRS doesn't need that additional California schedule. I was able to go back into TurboTax, search specifically for "California EITC schedule," add the missing form, and then submit a paper return with all the correct documentation. Just got confirmation yesterday that it was accepted! For anyone still struggling with state rejections, I'd definitely recommend asking specifically about state-only forms and schedules that might not be automatically generated by your tax software. Sometimes it's not about fixing what you entered, but about adding something that was never included in the first place.