Does the 3rd shareholder also need to file an amended personal return if they didn't initially report their share of S-Corp income?

Yes, absolutely. Once you issue them a K-1 (even retroactively), they'll need to amend their personal return to include their share of the S-Corporation's income, deductions, credits, etc. This is crucial because the IRS matches K-1 information against individual returns. If your corporation was profitable and distributions were made, this could result in additional tax liability for that shareholder. If it showed losses, they might actually benefit from amending to claim their share of the losses (subject to basis limitations).

Form 8832 is typically used when you want to change how your business is classified for tax purposes (like switching from partnership to corporation). It's generally NOT needed for simply adding or changing shareholders in an existing S-Corp. What you need is an amended 1120-S and revised K-1s. Your accountant might be confusing this with Form 2553 (Election by a Small Business Corporation) which is used to elect S-Corp status in the first place. If your accountant is suggesting Form 8832 for this situation, I'd honestly get a second opinion.

Is there a simple way to figure out which credits I might qualify for? There seem to be so many and the eligibility requirements are confusing.

The most common credits for younger people are the Earned Income Tax Credit (if your income is below certain thresholds), education credits like the American Opportunity Credit or Lifetime Learning Credit if you've paid for college, the Saver's Credit if you've contributed to retirement accounts, and potentially the Child Tax Credit if you have kids. Most tax software will automatically check your eligibility for credits as you go through the filing process. You just answer questions about your situation, and it determines what you qualify for. That's why I recommend software for beginners - it does the heavy lifting of figuring out which credits apply to you.

Do you think that's better than using tax software for a first-timer? I'm worried I'll get totally lost in the forms without guidance.

Thanks so much for sharing your experience! Did you have to calculate the premium amount yourself or did MetLife provide that information on the 1099-R? I'm trying to figure out how I'd even know my total premium payments since I don't have all my old statements.

MetLife provided both the gross distribution amount and the taxable amount right on the 1099-R form. Box the total cash value I received, and Box 2a showed only the taxable portion ($600 in my case). If Allstate doesn't calculate it for you, you might need to request a policy summary showing your total premium payments over the life of the policy. They should be able to provide that information since they need it for their own tax reporting.

I surrendered it completely. I canceled my Allstate whole life policy and switched to a term policy with a different company. They sent me a check for the full cash value that had accumulated.

Just to add to this conversation - surrendering the policy completely (like OP did) vs. taking a loan against the cash value have different tax implications. Surrendering means you'll potentially pay tax on gains, while loans generally aren't taxable events (though they reduce your death benefit until repaid).

That's a really smart point about considering future income growth! Do you know off-hand what the depreciation percentages would be for each year if I went the MACRS route? And did you have to file any special forms when you did this?

For 5-year property under MACRS with the half-year convention, the percentages are roughly: 20% in year 1, 32% in year 2, 19.2% in year 3, 11.52% in year 4, 11.52% in year 5, and 5.76% in year 6. But since you're starting in the year after purchase, you'd use 32% for this year. Yes, you'll need to file Form 4562 (Depreciation and Amortization) with your Schedule C regardless of which method you choose. It's not particularly complicated, but tax software makes it much easier. The form has specific lines for listing your depreciable business assets and the method you're using.

I used TurboTax Self-Employed last year for my freelance business, and it does handle depreciation including Section 179 and MACRS. It asks a series of questions about when you purchased the equipment, what it's used for, and then gives you the options. It filled out Form 4562 automatically based on my answers. The interview process was pretty straightforward for basic equipment like computers. If you have more complex assets it might be worth getting additional help, but for a laptop used for tutoring, TurboTax should be fine.

That's super helpful, thanks! Sounds like it should work for my situation too. I was worried I'd need to understand all the depreciation rules myself, but it sounds like TurboTax guides you through it. Appreciate the feedback!

Thanks for mentioning that about eBay handling the sales tax now. I didn't realize that! So I just need to focus on accurately reporting my cost basis vs. selling price on my tax return? Do you know if it matters whether these were personal items vs. items I bought with the intention to resell?

For the IRS, intent does matter. If these were truly personal items you originally bought for yourself (not with intention to resell), then you're generally not taxed on sales unless you sell for more than your purchase price. Many personal items actually sell at a loss, which isn't deductible for personal items. If you bought items specifically to resell, that's different - you'd report all profit as business income on Schedule C and could deduct legitimate business expenses. The line gets blurry when you're selling collectibles that appreciated in value while you owned them. Those can be subject to capital gains tax (usually at higher collectible rates of 28% versus normal capital gains rates).

The 1099-K thresholds are actually changing! Congress kept pushing back the $600 reporting threshold. It was supposed to start in 2022, then 2023, and now it's delayed again. So confusing to keep track of. I think we're still at $20K/200 transactions for 2023 tax year.