


Ask the community...
Another option you might consider is using the Social Security Administration's Business Services Online (BSO) website. Even though you mentioned having trouble with it, there's actually a specific way to report zero wage W-2s through their system. When you're entering the W-2 information, check the "Zero Wage" indicator box in the W-2 Online application. This tells the system you're intentionally submitting a W-2 with no wage information. Here's the direct link to BSO if you need it: https://www.ssa.gov/bso/bsowelcome.htm
I tried that first but couldn't find the zero wage indicator box anywhere in the interface. Is it hidden in an advanced section somewhere? The BSO interface is not exactly user friendly.
It's definitely not in an obvious place! You need to first select "Report Wages to Social Security" from the main BSO menu, then choose "Create/Edit W-2/W-2c Online." After you've entered the employee information, there should be a checkbox labeled "Zero Wage" near the bottom of the wage information section. If you still don't see it, make sure you're using the W-2 Online application and not the W-2 file upload option, as they have different interfaces. Also, sometimes you need to complete all the required fields first (name, SSN, address) before that option becomes visible. The BSO system is definitely frustrating to navigate!
Has anyone tried just using regular tax software like TurboTax or H&R Block for this? I had a similar issue last year and ended up using H&R Block's small business option. It wasn't free but it handled my zero wage W-2 without any problems.
Just wanted to add another perspective here. I'm a small business owner who didn't file personal returns for 2 years and then applied for S corp status without fixing those first. BIG MISTAKE. Not only did they reject my S corp election, but it triggered notices for all my unfiled returns at once. Ended up with penalties that were way higher than if I'd just dealt with the unfiled returns first. The rejection letter specifically mentioned unfiled personal returns as the reason. The IRS computer systems are much more interconnected than most people realize. When you file that 2553, it absolutely creates a compliance review.
Can I ask how long it took between submitting your S corp election and receiving the rejection/notices about your unfiled returns? Was there any warning or did they just hit you with everything at once?
It took about 6 weeks from when I submitted Form 2553 until I received the rejection letter. There was no warning at all - the rejection came first which specifically mentioned "taxpayer not in compliance with filing requirements" as the reason. Then about 2 weeks after that rejection letter, I started receiving separate notices for each unfiled tax year requesting that I file returns immediately. The notices came with proposed penalty amounts that increased with each year I was behind. The whole process created a much bigger headache than if I'd just caught up on filings first.
Has anyone used a tax professional to help navigate this specific situation? I'm wondering if having a CPA or EA submit both the catch-up returns AND the S corp election might look better than doing it myself.
I used a CPA when I was in this exact situation last year. Having them handle everything definitely helped. They filed my missing returns first, waited about 45 days, then submitted the S corp election. Everything went through without issues. They told me the key was getting the personal returns processed BEFORE submitting Form 2553. Also, they filed a disclosure statement with my catch-up returns explaining the late filing was unintentional which may have helped avoid penalties.
Thanks for sharing your experience! That 45-day waiting period between filing the missing returns and submitting the S corp election makes a lot of sense. Did your CPA mention anything about whether you needed to wait for formal processing confirmation from the IRS before submitting the 2553?
7 One thing nobody's mentioned yet is that CPAs can get you in compliance, but tax attorneys have attorney-client privilege. That means if you discover something problematic from the past, discussions with your tax attorney are protected in ways conversations with a CPA aren't.
16 Wait really? So if I tell my CPA about mistakes I made on past returns, they could be forced to tell the IRS, but a lawyer couldn't?
7 That's exactly right. Conversations with your attorney are protected by attorney-client privilege, which means they generally cannot be compelled to disclose what you've told them about past issues. CPAs do have a type of confidentiality privilege, but it's much more limited and has significant exceptions, especially in cases involving potential tax fraud or criminal matters. If you're concerned about disclosing past problems, speaking with a tax attorney first provides stronger protection while you figure out the best approach to resolve the situation.
5 Don't forget enrolled agents (EAs)! They're tax specialists licensed by the IRS who can represent taxpayers before the IRS just like CPAs and attorneys but usually cost less. For many situations they're perfect middle ground.
Just a heads up on the AMT credit recovery strategy - if your income fluctuates year to year, you might want to time when you claim these credits. In years when your income is higher, your regular tax is more likely to exceed your AMT, allowing you to recover more of those credits. I've been carrying forward AMT credits from ISOs for 3 years now and have recovered about 70% by being strategic about timing. Don't forget Form 8801 needs to be filed every year until your credits are used up, even in years when you don't recover any portion of them.
Any recommendations on what income level typically makes it worth claiming? I'm in a similar situation with about $12k in AMT credits but not sure if my $110k salary will trigger enough regular tax to recover anything.
At $110k, you'll likely recover some of your credits, but it depends on your deductions, filing status, and other factors. If you're single with standard deduction, you'd probably begin to recover credits at that income level. Generally, I've found that married couples often need $150k+ combined income before recovering significant AMT credits, while singles can start seeing benefits around $90-100k. Consider consulting with a tax pro for a year-by-year projection based on your specific situation.
Has anyone here done a disqualifying disposition of ISO shares after paying AMT? I'm in a similar situation but thinking about selling my shares within a year of exercise. Trying to understand the tax implications.
If you do a disqualifying disposition (selling before meeting holding requirements), it gets even more complex. The good news is you'll generally receive an AMT income adjustment that can help recover some of your AMT in the year of sale. The bad news is you'll pay ordinary income rates on the spread instead of capital gains rates.
LongPeri
Don't forget that if you're filing Schedule C for the business (which you probably are with a single-member LLC), you'll also need to complete Schedule SE for self-employment tax. The withholding payments from the payroll company for the owner are actually estimated tax payments, not traditional withholding like you'd see on a W-2. Make sure you're separating the business owner's draws/payments from the employee payroll. Only the employees should have traditional withholding.
0 coins
Oscar O'Neil
ā¢Is this still true if the LLC owner is on payroll too? Like if they're getting a W-2 from their own company?
0 coins
LongPeri
ā¢No, that changes things significantly. If the LLC owner is receiving a W-2 from the business (putting themselves on payroll), then they're treating the LLC as an S-Corp for tax purposes, not a single-member LLC with pass-through taxation. In that case, the owner's W-2 would have withholding just like any employee, and those withholdings would be credited automatically when you enter the W-2 in TurboTax. The business would still file its own return (typically Form 1120-S for an S-Corp), and the owner would receive a K-1 for their share of profits beyond their salary.
0 coins
Sara Hellquiem
If your husband is the only owner of the LLC, did you elect S-corp taxation? Because that would completely change how this all works. With S-corp status, he should be on payroll like a regular employee with withholding that would show up on a W-2 that gets entered directly into TurboTax.
0 coins
Charlee Coleman
ā¢Not the OP but our accountant recommended we switch to S-corp status once our profits hit about $40k annually. The savings on self-employment tax were worth the extra paperwork.
0 coins