Thank you for this practical advice. If I go the loan route, do I need to create the documentation before or after taking the money? I've already taken about $15K more than my 1% share would justify in 2024, and we haven't filed yet. Can I retroactively document this as a loan? Also, any guidance on what a "reasonable" interest rate would be in the eyes of the IRS?

Ideally, loan documentation should be created before the money is distributed, but you can retroactively document it if you haven't filed yet. The key is to create the documentation before the end of the tax year - so you're still within the window for 2024. For interest rates, the IRS publishes Applicable Federal Rates (AFR) monthly. For a loan between related parties, you should use at least the minimum AFR for the appropriate term (short, mid, or long) from the month the loan was made. For April 2024, the short-term rate was around 5.25%. Using anything significantly below this could cause the IRS to impute interest, which creates tax headaches for both parties. The documentation should include a clear repayment schedule, consequences for default, and signatures from both parties. Make sure your accountant records it properly on the books as a loan to shareholder rather than a distribution.

This could trigger gift tax issues depending on the value of the company. If mom gives additional ownership percentage that has significant value, it might require filing a gift tax return. Also some S-corps have restrictions in their operating agreements about ownership transfers. But I agree it might be the cleanest solution long-term.

Thanks for the software suggestions! I hadn't heard of ATX. I'm definitely worried about the learning curve - is it realistic to pick up new tax software and be proficient by February if I start learning in November?

Yes, starting in November gives you plenty of time to get comfortable with the software. Most professional tax programs have similar workflows since they're all built around IRS forms. The differences are mainly in navigation, shortcuts, and additional features. Most vendors offer free training webinars in November-December specifically for new users. Take advantage of those! I'd also recommend doing 5-10 practice returns using last year's forms - use your own return, family members, or make up some scenarios. This hands-on practice will make you much more efficient when you're facing real client deadlines.

Also, make sure you get an EFIN from the IRS if you plan to e-file for clients. The application process can take 6-8 weeks, so don't leave it until January! And definitely get E&O insurance. I had a client situation last year where it saved me from a potential $14,000 claim when I made a mistake on a complex investment calculation.

Thanks for bringing this up! I did pay for my flight to Atlanta (about $350) plus the hotel for 3 nights (~$600) and the convention entry fee ($150). Would all of these potentially be deductible against the prize money? And where exactly would I list these on my tax forms?

Yes, those expenses would potentially be deductible against your prize money! The flight, hotel, and convention entry fee would all count as expenses directly related to winning the prize. You would list these as a reduction to the income on Schedule 1, Line 8z. For example, if your prize was $2,500 and you had $1,100 in related expenses, you would report "Gaming tournament prize income $2,500 less related expenses of $1,100 = $1,400" on that line. Make sure to keep all your receipts in case of an audit.

Yep, and if you won it while physically in Texas but live in North Carolina, you might need to file a non-resident tax return for Texas too if they require it for prize winnings. Tax rules vary by state!

Does this apply even if I'm not getting a refund? I usually end up owing a small amount but still claim the Child Tax Credit for my two kids.

If you end up owing taxes rather than receiving a refund, the PATH Act verification delays won't impact you. The delay only affects refunds being issued to taxpayers claiming these credits. Since you typically owe a small amount, you can file as early as January 23rd and the PATH Act won't cause any additional delays in your return processing. Just make sure you pay any amount owed by the filing deadline (April 18th this year) to avoid penalties and interest.

Yes, IRS Free File typically opens on the same day as the tax season starts! I've been using it for years. Just be aware that some of the participating companies sometimes add their own software to the mix a few days later than the official start date.

Thank you for mentioning that! I did claim treaty benefits under Article 20 for my country, but I didn't submit a Form 8833 because I thought it wasn't required for standard treaty exemptions. Is that form always required even for common treaty positions?

Form 8833 has some exceptions for common treaty positions, but the rules are quite specific. For students and teachers claiming benefits under Articles like 20, you often don't need Form 8833 for the standard exemptions. However, if your situation has any unusual aspects or if you're claiming benefits that reduce your tax by more than $10,000, then Form 8833 is required. If you're unsure, it doesn't hurt to complete and send Form 8833 even if it wasn't strictly required. The IRS would rather have more documentation than less. Include a copy of your relevant treaty article and explain your position clearly to avoid further delays.

Sprintax is the best for 1040NR btw... most regular tax software doesn't handle international situations well. I tried using TurboTax my first year and it was a disaster. Switched to Sprintax and haven't had issues since.