I've been helping my elderly parents with a similar W4 situation this year. One thing I learned that might help your aunt and uncle - if they're both working part-time, their employers' payroll systems might not be calculating withholding correctly because each job doesn't "know" about the other income. The new W4 form has a specific section (Step 2) for multiple jobs that helps address this. You can either use the worksheet or the online calculator to figure out the right amount. But honestly, for their income level and to keep it simple, adding a flat extra amount per paycheck might be the most straightforward approach. Given their $86k combined income and the fact they had almost nothing withheld last year, I'd estimate they probably owe around $12,000-15,000 in federal taxes. If they have about 8 months left in the year, adding $400-500 extra withholding per month combined should get them much closer to even. They can always adjust up or down based on how their year-end projection looks. The most important thing is getting something in place now rather than waiting and ending up in the same situation next April!

This is such a common issue with couples who both work! I went through something similar with my parents last year when they ended up owing about $8,000 unexpectedly. One thing that really helped us was to think of it in terms of "catch-up" withholding for this year plus "correct" withholding going forward. For your aunt and uncle's $86k income, they should expect roughly $10,000-13,000 in total federal taxes annually. Here's what worked for us: We calculated how much they should have withheld by now (based on how many months into the year we were), compared that to what was actually withheld from their paystubs, and then spread the "catch-up" amount over the remaining paychecks of the year, plus added the ongoing correct amount. So if they're missing about $10,000 in withholding and have 8 months left, that's about $1,250 extra per month just to catch up, plus whatever they need for ongoing proper withholding. It sounds like a lot, but breaking it down monthly makes it more manageable than getting hit with another huge bill next April. Also, definitely have them keep all their paystubs so you can track progress throughout the year and make adjustments if needed!

Quick question - if OP changes their W-4 now to withhold a bunch of extra money from their last few 2025 paychecks, will that actually help with the underpayment penalty? I thought the penalty was calculated by quarter, so fixing it in December wouldn't help with the earlier quarters when nothing was withheld?

I actually just went through this exact same situation earlier this year! Made the same mistake with the exemption box and didn't notice for months. Here's what I learned: First, don't panic - this is more fixable than you think. The key thing to understand is that withholding from your paycheck gets treated as if it was paid evenly throughout the year, even if you do it all in December. This is huge because it can help with penalties retroactively. I'd strongly recommend doing BOTH things mentioned above - submit a new W-4 with maximum additional withholding for your remaining paychecks AND make a Q4 estimated payment if needed. Calculate roughly what you'll owe for the full year, subtract what was already withheld from your first job, then split the remainder between increased withholding and estimated payment. Also look into first-time penalty abatement if you haven't had issues before - it can waive penalties entirely if you qualify. The IRS is actually pretty reasonable about honest mistakes like this, especially if you're proactive about fixing it before filing. One last tip: when you do your W-4 next year, maybe set it to withhold slightly more than needed so you have a buffer. Better to get a small refund than deal with this stress again!

Just to reinforce what others have said - Form 2553 is definitely a one-time filing! I made the same mistake in my first year as an S-Corp and called the IRS thinking I needed to refile it. The representative confirmed that once your election is accepted, it stays in effect unless you voluntarily revoke it or something happens that disqualifies your S-Corp status. What you DO need to file annually is Form 1120-S (your S-Corp tax return) and prepare Schedule K-1s. Also don't forget about the reasonable salary requirement - as an S-Corp owner who works in the business, you need to pay yourself W-2 wages before taking distributions. That's probably the most important ongoing compliance issue to stay on top of. The IRS website has a good checklist for S-Corp annual requirements if you want to bookmark it for future reference!

Great question! I went through this same confusion when I first elected S-Corp status. You only need to file Form 2553 once - it's not an annual requirement. Once the IRS accepts your election (which they clearly did since you received the acceptance letter), that status remains in effect until you either voluntarily revoke it or something disqualifies your corporation. What you WILL need to file annually is Form 1120-S, which is your S-Corporation tax return, along with Schedule K-1s for all shareholders (just yourself in your case). The deadline for Form 1120-S is typically March 15th, but you can request an extension if needed. Also, since you're a single-member S-Corp, make sure you're paying yourself reasonable compensation through payroll before taking any distributions. This is one of the key ongoing compliance requirements that the IRS watches closely. The salary should reflect what you'd pay someone else to do your job in your business. Keep that acceptance letter in your records - it's proof of your S-Corp election status!

Has anyone mentioned the "reasonable compensation" requirement for S-Corps? This is where most expats get tripped up. The IRS requires you to pay yourself a "reasonable salary" subject to FICA taxes before taking distributions. With FEIE, this gets messy because only the salary portion qualifies for FEIE (up to the limit), not the distributions. So you might save on self-employment tax but lose FEIE benefits on the distribution portion.

I went through almost the exact same situation last year - LLC with FEIE benefits, considering S-Corp election, and dealing with unresponsive tax professionals. Here's what I learned that might help: The electronic signature issue will likely save you, as others mentioned. The IRS is incredibly strict about wet signatures on Form 2553. But definitely call proactively rather than waiting - it shows good faith and creates a paper trail. Regarding the S-Corp vs FEIE analysis, here's the key issue most people miss: with S-Corp status, you're required to pay yourself "reasonable compensation" as an employee before taking distributions. Only that salary portion qualifies for FEIE, not the distributions. So if your business income is $100k and you set reasonable salary at $60k, only the $60k qualifies for FEIE. The remaining $40k in distributions doesn't qualify for FEIE but also isn't subject to SE tax. Compare this to LLC status where your entire $100k of business income qualifies for FEIE (up to the annual limit) but is subject to SE tax. The math really depends on your specific income levels and how much of your income falls under the FEIE limit. In many expat situations, especially with income under $120k, staying as an LLC with full FEIE benefits actually comes out ahead. Get a proper analysis done before making any decisions - this isn't something to guess on.

I went through the exact same thing with a Letter 12C for my 2020 taxes! It's definitely stressful when you're not sure what they want. From my experience, the key is to read the letter very carefully - they usually specify exactly which tax year and which forms they need. For most Letter 12C requests, you'll need: - The W2 you mentioned (make sure it's for 2020) - Any 1099 forms if you had other income - A copy of the letter itself - Sometimes proof of deductions if that's what they're questioning Don't panic about the timeline - even if you're past the 30 days, they usually accept late responses as long as you send everything they need. I was about 6 weeks late responding to mine and still got my refund processed. One tip: make copies of everything before you send it, and if you fax, keep the confirmation sheet. The IRS can be slow but they do process these eventually. My refund came about 2 months after I sent my response. You've got this! Just gather what they asked for and get it submitted.

I just went through this exact situation with a Letter 12C last year! The stress is real when you're not sure what they want and that 30-day deadline is looming. Here's what I learned from my experience: The Letter 12C usually means there's a mismatch between what you reported and what they have on file from your employers/financial institutions. For 2020 taxes, this was pretty common because of all the pandemic-related changes and delays in reporting. Besides your W2, check if the letter mentions any specific lines on your tax return they're questioning. Sometimes they want documentation for: - Unemployment compensation (if you received any in 2020) - Stimulus payments that might have been incorrectly reported - Any 1099 forms for side income or investment earnings The good news is that most Letter 12C issues get resolved pretty quickly once you submit the right documents. I was worried for nothing - turned out they just needed to verify my W2 matched what my employer reported, and I had my refund about 6 weeks later. Don't stress too much about being 2 weeks into the 30-day period. Focus on gathering the documents and getting them submitted. You've got this!