Yes, the company that paid you would have sent a copy of your 1099-NEC to the IRS. The IRS has automated systems that match reported income with filed tax returns, so they likely know about the discrepancy. That's why it's good you're fixing it proactively!

That's really smart! Do you have any specific tips on how to document all those different responsibilities? Like do you keep a time log or something?

Oh that's a good point about the calendar year requirement. My business tends to be seasonal with a lot of income at the end of the year, so that might actually work out well for planning purposes. Do you happen to know if I'd need to start taking a salary immediately after forming the S-Corp? Or could I wait until I've built up some reserves in the business account first?

You should start taking a reasonable salary as soon as the S-Corp election is effective. The IRS looks suspiciously at S-Corps that distribute profits without paying any salary, as that appears to be avoiding payroll taxes. That said, you don't necessarily need to take a salary with every single payment that comes in. Many S-Corp owners set up quarterly or monthly payroll for themselves, allowing some cash to accumulate in the business account before processing payroll. Just make sure that by the end of the tax year, you've paid yourself a reasonable salary relative to the profit the business generated. Your payroll schedule should be consistent and documented as part of your business practices.

That's an important point I hadn't considered. I'm not their representative payee (their mom is, though she doesn't live with us), but I do provide housing, food, clothes, etc. If I receive tax benefits from claiming them, should I be documenting how I spend that money specifically on them?

Since you're not the representative payee, you have more flexibility in how you use tax benefits you receive from claiming the children. The money from tax credits like the Child Tax Credit is yours to use as you see fit - the IRS doesn't impose restrictions on how you spend it. However, it's still a good practice to document how you support the children generally, especially if there's ever a question about whether they qualify as your dependents. Keep receipts for major expenses you cover for them, document that they live with you full-time, and maintain records of any financial support you provide. This creates a clear paper trail that shows you meet the requirements to claim them.

Do you need the biological parent to sign anything formally stating they're not claiming the children? I've heard conflicting things about Form 8332 being required in these situations.

That's actually a really good point. I did pay with my credit card, so I could probably dispute the charge. Do you know what kind of documentation I'd need to provide to the credit card company? Would screenshots of my unanswered emails be enough?

Screenshots of emails, chat transcripts, and dates/times of attempted communications would be perfect documentation. Most credit card companies have a fairly straightforward dispute process - you'll typically need to fill out a form explaining that you paid for services that weren't delivered despite multiple attempts to resolve the issue. The key is demonstrating that you made reasonable efforts to work with the merchant first. Include specific details like "Sent emails on March 5, 12, and 19 with no response" and "Initiated customer service chat on March 25 which was terminated by representative without resolution." Credit card companies generally side with customers in cases where services weren't provided, especially when you have documentation showing the company was unresponsive.

That's actually genius. Do you remember which manager you contacted? I'm having similar issues with them right now.

Just checked my paystubs and you might be onto something! I see the federal withholding but there's nothing listed for state taxes at all. My company is headquartered in TX (no state income tax) but I live and work remotely in IL. Could this be why I'm showing such a big tax bill? Do I need to make estimated tax payments to Illinois or something?

That's almost certainly your problem! Illinois definitely has state income tax (4.95% flat rate I believe), and if your company isn't withholding it because they're Texas-based, you'll owe all of that at tax time. You should immediately contact your HR department and ask them to start withholding Illinois state tax. For the amount you've already earned without withholding, you might want to make an estimated tax payment to Illinois to avoid underpayment penalties. The Illinois Department of Revenue website has forms for this.

This happened to my nephew! He checked "exempt" thinking it meant exempt from filling out the complicated parts of the form. Ended up with zero withholding and a massive tax bill. Double check your W-4 and paystubs!

I just pulled up a copy of my W-4 and I definitely didn't check the exempt box. But I did notice something weird - my employer is still using the old W-4 form (the one with allowances) even though I thought that changed years ago? Could this be causing withholding issues? I claimed "0" allowances thinking that was the most conservative option, but maybe that doesn't work the same way with the new tax laws?