That's a really interesting approach I hadn't considered! My daughter is definitely talking about grad school already (she's interested in research). How did you handle the estimated tax payments during those years? And did you run into any issues with the financial aid office regarding how you were allocating the scholarship funds?

We calculated her quarterly estimated tax payments based on the taxable scholarship amount. Since her only income was the taxable portion of the scholarship, it was pretty straightforward - we just divided her expected tax liability by four and made the quarterly payments. She never owed more than about $800 per year in total federal taxes because her taxable income was relatively low. We didn't have any issues with the financial aid office at all. They actually helped us understand how to properly document the allocation between tuition/fees and the room/board expenses. The key was communicating with them about our plan. They provided documentation showing which expenses were considered qualified education expenses versus living expenses, which made tax filing much easier. Most financial aid offices deal with this situation regularly and can provide the documentation you'll need for tax purposes.

That's a really important point. Do you know what the threshold is where the kiddie tax kicks in? Is it just the standard deduction amount or is there some other limit?

I did this for my job as a martial arts instructor. It took about 6 months but the IRS determined I was misclassified and I was able to file as self-employed, which saved me thousands in deductions.

This is actually a really important point! When I switched from W2 to 1099 for my coaching job, I was excited about the deductions but then got hit with that self-employment tax. Wasn't prepared for it.

I hadn't even thought about that aspect. My last pay stub shows I'm paying about 7.65% for Social Security and Medicare combined. So I'd basically be paying double that as a 1099? That definitely changes the math on whether pushing for reclassification makes sense. I'll need to calculate if the deductions would offset that extra cost.

That's a good point I hadn't considered. I have no idea if he had insurance, but I'll definitely look into that. The police haven't given us much information about his business affairs due to the ongoing investigation. I'm guessing we'll learn more once the criminal case progresses and the estate gets settled. Would business insurance typically cover something like this?

Most legitimate HVAC contractors carry some form of business insurance that might cover situations where they can't complete contracted work. It varies widely by policy, but many include provisions for "business interruption" or "contract fulfillment" that could apply here. The estate administrator would be the one handling these claims once appointed by the court. I'd recommend documenting everything meticulously - your original contract, what was completed, what you paid to the second contractor, etc. This will be important not just for the tax credit but also for any future discussions with the estate. In my situation, the insurance company actually contacted us directly once a claim was filed, but that might take time given the circumstances.

100% this. I got audited specifically on my EEHIC claim last year. They wanted the AHRI certificate showing the exact efficiency ratings, proof the contractor was certified, and itemized invoices showing what portion was for equipment vs labor. The equipment manufacturer specs were super important - they rejected my first submission because it didn't clearly show the SEER2 rating.

What's considered "reasonable" tho? Is there like a percentage of business income that's the standard? I've heard everything from 30% to 60% of profits should be salary.

There's no fixed percentage that's automatically considered "reasonable" - it depends on your industry, role, qualifications, and what similar positions would pay in your area. A good starting point is to research what someone would earn doing your job in your location if they weren't the owner. Sites like Bureau of Labor Statistics or industry salary surveys can help establish this baseline. Some tax professionals suggest that anything less than 40-50% of your business profits as salary might raise eyebrows, but it really depends on your specific situation.

I switched from TurboTax to H&R Block last yr for my s-corp and it was WAY better. TurboTax kept giving me errors about my 941 payments but H&R Block had a specific section for SMLLC S-corps. The questions were clearer and it properly showed how the salary and distributions flow between the 1120S and 1040.

Would this still apply for 2022 taxes? I was unemployed for most of 2021 but also for part of 2022, so wondering if I can use this for next year's filing too.

Unfortunately, the lookback provision was only available for tax years 2020 and 2021 as a temporary COVID relief measure. For your 2022 taxes (which you'll file in 2023), you'll need to use your actual 2022 earned income to calculate your EITC. If you're concerned about a lower EITC for 2022, focus on documenting all eligible earned income you did have during the year, and look into other credits you might qualify for like the Child Tax Credit if you have dependents.

In TurboTax, you need to go to the Deductions & Credits section, then look for "Income that qualifies for certain credits." There should be a question about whether you want to use your 2019 earned income. It's easy to miss if you're clicking through quickly!