I had no idea about this rule! So if I stay on my HDHP through all of 2024, I can keep the full $3850 contribution for 2023, even though I only had coverage starting in May 2023? Do I need to indicate this somehow on my 2023 Form 8889?

Yes, exactly! If you had HDHP coverage on December 1, 2023, you qualify for the "last-month rule" and can contribute the full $3,850 for 2023 - as long as you maintain HDHP coverage for all of 2024. On Form 8889, you'll need to check the box on line 3 that says "If you, and your spouse if filing jointly, had an HDHP for the entire year, check the box..." This indicates you're using the last-month rule. You would then enter the full-year contribution limit on line 3. Just remember this comes with that testing period requirement - if you don't maintain HDHP coverage through December 31, 2024, you'll have to include the "excess" portion in your income for 2024 plus pay that additional 10% tax.

Yes, you absolutely need to file Form 8889, even with employer payroll deductions. Your tax software might not be prompting you because it doesn't know you have an HSA. You need to specifically tell it that you contributed to an HSA. Look for the section in your tax software about HSAs, health accounts, or tax deductions/credits. Once you indicate you have an HSA, it should generate Form 8889. The form is required for ALL HSA contributions and distributions, regardless of how they were made. Your W-2 should show HSA contributions in box 12 with code W if they were made through payroll.

I thought Solo 401ks were only for self-employed individuals without employees. Doesn't an S-Corp usually have at least the owner as an employee? Would this still work if the owner is the only employee?

You're right to question this - I should have been more specific. A Solo 401k can work for an S-Corp if the only employees are the owner (and potentially their spouse). If the S-Corp has any other W-2 employees who work more than 1,000 hours per year, then you'd need a regular 401k plan with non-discrimination testing. If OP only has themselves (and possibly their spouse) as employees, then the Solo 401k is still an option and could allow for higher contribution limits than a SEP IRA in many cases, especially when you consider both the employer and employee contribution components.

Not a dumb question at all, but with an S-Corp, the home office deduction works differently than for sole proprietors. The corporation should reimburse you for the home office expenses rather than taking them directly on your personal return. The S-Corp can deduct the reimbursement and it's not taxable income to you if done correctly.

Thanks for sharing your experience! Do you think it makes sense to form an S-corp right away when switching from single-member LLC to having employees? Or should I stay as an LLC taxed as a partnership first until I hit that $40-50k profit consistently?

I'd recommend staying as an LLC taxed as a partnership first until you're consistently hitting that profit threshold. You can always convert to an S-corp later, and it's much easier than going the other direction. The LLC with employees will still give you the liability protection you need, but with less administrative overhead. One thing I forgot to mention - with an S-corp, you must pay yourself a "reasonable salary" before taking distributions. The IRS watches this closely. For construction contractors, that's typically 60-70% of your profit as salary at minimum. So if your profits are tight or inconsistent, the S-corp advantages diminish since most of your income will need to be salary anyway.

This is so true. I undercharged for years and was always broke. When I finally raised my rates by 25%, I lost maybe 10% of clients but made WAY more money overall. And the clients I kept were the ones who respected my work and didn't nickel and dime me to death.

That's really good advice, thank you! Do you know how long Form 4506 typically takes to process? I'm concerned about having proper documentation before next year's filing.

Form 4506 usually takes about 75 days to process, so it's definitely not a quick solution. That's why I'd recommend trying the certified letter to your accountant first since that would be much faster. For next year's filing, you should be fine even without a full copy of this year's return as long as you have your K-1. However, if you plan to switch accountants, having the complete return will help the new preparer understand your business situation better.

This is super important! My accountant filed my federal S-Corp return but completely forgot about my state filing. Ended up with a $400 penalty that took months to sort out.

Thank you for this insight - that's really helpful to know about them looking at earning potential. I have a question though - my earning history has been inconsistent because of contract work, with some years much higher than others. Will they just look at my highest earning year and assume that's my potential? Or do they take into account the volatile nature of contract work?

They typically look at an average of your recent years, but they'll definitely take into account your highest earning years as an indication of what you're capable of earning. However, if you can document that the contract work was irregular or that the industry has changed (especially with the company going bankrupt), that can help your case. Make sure to thoroughly document why your past income isn't representative of future earnings. Include any industry changes, health issues, or other factors that limit your earning potential going forward. The more documentation you provide showing why your situation has permanently changed, the better your chances of having them accept a reduced earning potential calculation.

Did you use a tax professional or do it yourself? I've been watching YouTube videos about the OIC process but everyone makes it seem so complicated. How long did the whole process take from application to acceptance?

I did it myself, though I spent about 3 weeks researching and preparing before submitting. It's definitely complicated but doable if you're organized. The whole process took about 9 months from submission to final acceptance. The key was being extremely thorough with the financial information and documentation. I literally sent them a binder with everything tabbed and indexed. The IRS assigned an offer examiner who called me twice to clarify some expenses, but otherwise the process was mostly waiting. When I got the acceptance letter, I paid the agreed amount within a week, and they released the federal tax lien about 30 days later. Just be prepared for a lot of paperwork and patience!