I messed up big time on this last year. Went to a medical conference in Paris, mixed in vacation, and didn't document which days were which. My accountant could only safely deduct about half of what should have been deductible because I didn't have good records. Pro tip: Use a separate credit card for business expenses vs personal expenses when on these trips!! And take photos of EVERYTHING. My friend even takes a pic of the conference schedule each day with annotations of which sessions she attended. Seems excessive but she's never had an issue with audits.

As someone who's been through multiple IRS audits as a 1099 medical professional, I can't stress enough how important real-time documentation is for international conferences. Here's what saved me during my last audit for a conference in Singapore: **Daily expense tracking app** - I used one that automatically categorizes expenses and lets you add voice notes explaining business purpose. Way better than receipts in an envelope! **Conference journal** - I kept detailed notes each day about: - Which sessions I attended and key takeaways - Professional contacts made and their relevance to my practice - How specific presentations apply to my current patient care **Photo documentation** - Beyond just receipts, I photographed: - Conference badges/credentials - Session sign-in sheets when available - Business cards from networking - Even the hotel business center when I worked on conference materials **Time allocation log** - I tracked hours spent on business vs personal activities each day. This was crucial for the mixed business/personal trip calculations. The auditor was actually impressed with my documentation system and accepted all my deductions without question. The key is treating documentation as part of your professional development, not just a tax requirement. One more tip: if you're presenting at the conference or serving on a committee, document that too - it strengthens your case that the trip was primarily business-focused.

I've been through this exact situation with my family restaurant LLC. What worked best for us was setting up clear independent contractor agreements with each family member based on their specific roles and level of involvement. For my mom who helps with bookkeeping twice a week, we created a 1099 arrangement with defined deliverables and hourly rates. For my brother who only helps during busy seasons, we structured it as project-based contractor work. The key things that helped us stay audit-proof: 1. Written contracts specifying exactly what work they'll do 2. Separate invoicing from them to the business (even though they're family) 3. Market-rate compensation - we researched what we'd pay non-family for the same work 4. Clear documentation that they control how/when the work gets done We've been doing this for 3 years now with no issues. The IRS agent I spoke with said family businesses get scrutinized more, so having everything documented properly from the start is crucial. One thing to avoid - don't try to disguise what are essentially wages as "consulting fees" if they're working regular hours under your direction. That's a red flag that can trigger an audit.

One thing I haven't seen mentioned yet is the self-employment tax implications for your family members. If you pay them as independent contractors (1099), they'll owe self-employment tax on those payments, which is about 15.3% on top of regular income tax. If you hire them as W-2 employees instead, you'd split the employment taxes with them (you pay half, they pay half through payroll withholding). Depending on how much you're planning to pay them, this could make a significant difference in their take-home amount. Also, make sure you're not inadvertently creating a "reasonable compensation" issue for yourself. The IRS expects single-member LLC owners who elect S-corp treatment to pay themselves reasonable wages before taking distributions. If you're paying family members but not taking a salary yourself, that could raise questions. Have you considered what election your LLC has made for tax purposes? That might influence the best approach for structuring these payments.

This whole system is so backwards! My son has a wrestling scholarship and we're dealing with the exact same frustration. He's literally risking injury every single day, maintaining strict weight requirements, following intense training schedules, and could lose everything if his performance drops - but somehow that's "unearned" income according to the IRS. What really gets me is that if he had a regular part-time job making the same amount, it would be considered earned income and taxed at his lower rate instead of ours through the kiddie tax. But because it's tied to his athletic performance and scholarship requirements, suddenly it's "unearned." The logic makes zero sense. We ended up having to pay significantly more in taxes because of this classification, even though he's working harder than most adults I know. Has anyone found any workarounds or ways to minimize the tax impact beyond the equipment reclassification strategies mentioned above?

I feel your pain on this issue! My daughter has a soccer scholarship and we've been battling this same "unearned income" classification for two years now. It's absolutely maddening that the IRS considers 25+ hours of weekly training, strict academic requirements, and constant performance pressure as "unearned." One thing that helped us significantly was getting really granular with the athletic department about expense categorization. Beyond just equipment, we were able to get training supplements that were mandatory for the team (protein powders, recovery drinks provided by the athletic department) classified as educational expenses since they were required for her program participation. We also discovered that some fees we thought were just "athletic fees" were actually tied to specific courses - like her sports medicine class that was required for her major had associated lab fees that were covered by the scholarship. Getting these properly categorized as qualified educational expenses rather than general room/board saved us about $800 in kiddie tax. The system is still broken, but documenting everything and pushing for detailed expense breakdowns from the school can help minimize the damage. Hang in there - hopefully Congress will eventually fix this ridiculous classification system!

I'm confused about something... if OP's Box 5 ($39,560) is higher than Box 1 ($31,250), doesn't that mean they have about $8,310 in taxable scholarship income? Seems like a lot for a student who probably doesn't have much other income.

Just to add some clarity for future reference - when you're claimed as a dependent, you generally can't claim education credits on your own return, but you ARE still required to report any taxable scholarship income. This is a common source of confusion. The key thing to remember is that Box 1 on your 1098-T typically shows tuition and required fees, while Box 5 shows total scholarships/grants. If Box 5 is higher than Box 1, that difference often represents money that went toward non-qualified expenses like room and board, which becomes taxable income to you. However, as others mentioned, with the standard deduction being $13,850 for 2023, many students won't actually owe tax on that scholarship income unless they have significant other income sources. You should still report it correctly though - the IRS does cross-reference 1098-T forms with tax returns. Make sure to coordinate with your dad so he knows to claim your education expenses for the credits, and you properly report any taxable scholarship portion on your return. Getting it right the first time saves headaches later!

3 Don't forget the state-specific costs! Here in California, we pay $800 minimum franchise tax regardless of whether we're profitable or not. Made my S Corp totally NOT worth it until I was clearing six figures consistently. Check your state's fees first!

I've been researching S Corp conversion for my consulting business and want to add a few hidden costs that haven't been mentioned yet: - Registered agent fees ($100-300/year in most states) if you don't want to use your home address - Business insurance premiums often increase for corporations vs sole props - Credit card processing fees sometimes have higher rates for corporate accounts - If you travel for business, corporate expense documentation requirements are much stricter One thing that really helped me was creating a spreadsheet comparing my current sole prop costs vs projected S Corp costs over 3 years. At $87K revenue like the OP, you're right at the borderline where it might not make sense initially, but could pay off as you grow. The key is being realistic about ALL the ongoing compliance costs, not just the obvious ones. Also worth noting - if you mess up the corporate formalities or payroll requirements, you can lose the tax benefits retroactively, which would be costly.