Late to the party but wanted to add something important: If you already have business assets in your sole proprietorship (equipment, vehicles, etc.), make sure you properly document transferring these to the new LLC/S-corp. This is called a Section 351 transfer, and if done correctly, it's tax-free. Keep good records of the fair market value of everything you transfer! The IRS loves to audit new S-corps that don't handle this part correctly.

This is exactly the kind of detailed planning I wish I had done! Your timeline approach is really smart - creating that clean break between tax years will definitely make your bookkeeping much simpler. One additional tip from my own transition: Start keeping separate books for the LLC immediately once you form it, even though you'll still be filing Schedule C for 2024. This means opening a dedicated business checking account under the LLC's EIN and routing all business income/expenses through it. When January 1, 2025 rolls around and your S-corp election kicks in, you'll already have clean, separate financial records to work with. Also consider setting aside some cash now for the additional costs that come with S-corp status - you'll need payroll processing, potentially quarterly tax filings, and maybe a more robust accounting system. But the tax savings usually more than make up for these added expenses once your profits hit the right threshold. Good luck with the transition - sounds like you've got a solid plan!

14 Be careful with mixing W-2 and 1099 work! I messed up last year and ended up owing WAY more than I expected. Make sure to use the Self-Employment Tax Calculator on the IRS website to estimate what you'll owe.

As a college student who just started mixing W-2 and gig work myself, I can't stress enough how important it is to track everything from day one! I made the mistake of not keeping receipts for my first month of delivery work and it was a nightmare trying to reconstruct my expenses. One thing that really helped me was opening a separate checking account just for my Doordash earnings. I deposit everything there and then transfer my estimated tax portion (about 30%) to a savings account immediately. This way I'm never tempted to spend my tax money and I always know exactly how much I've earned from gig work versus my regular job. Also, don't forget that as a student, you might still qualify for education credits even with the additional 1099 income - just make sure your total income doesn't push you out of eligibility ranges for things like the American Opportunity Tax Credit.

This is such a frustrating but unfortunately common issue with the IRS! I went through something very similar with my LLC's S-corp election about 18 months ago. The stress of thinking you missed the deadline when you actually filed on time is awful. Here's what I learned from my experience: the dual approach of certified mail AND fax that the IRS agent recommended is absolutely the way to go. Don't just pick one method - do both. I made the mistake of only re-faxing initially, and guess what? They "lost" that one too! When I finally did both methods simultaneously, I got my acceptance letter within about 5 weeks. The key things that I think helped were: 1. Being very specific in my explanation letter about the original filing date and emphasizing it was within the 75-day window 2. Including the phrase "reasonable cause under IRC Section 1362(b)(5)" (someone mentioned this earlier and it's spot on) 3. Requesting written confirmation that the election would be retroactive to my intended effective date 4. Following up with a call to the Business Entity Control department (not general customer service) about 3 weeks after sending The whole situation taught me that the IRS fax systems are honestly pretty unreliable, especially for important documents like Form 2553. For any future business filings, I now always use multiple submission methods from the start. Hang in there - you did everything right, and with proper documentation and persistence, this will get resolved without penalties. The proof of your timely fax submission is your protection!

This thread has been incredibly helpful! I'm dealing with a similar Form 2553 situation right now where the IRS claims they never received my fax despite having transmission confirmation. It's so validating to see that this is a widespread issue and not just my bad luck. I'm definitely going to follow the advice here about doing both certified mail AND e-fax simultaneously, creating a detailed timeline document, and specifically requesting retroactive effective date in my explanation letter. The tip about referencing IRC Section 1362(b)(5) for reasonable cause relief is something I never would have known to include. One question for those who have successfully resolved this - when you called the Business Entity Control department for follow-up, did you need any specific information beyond your EIN and the date you submitted? I want to make sure I have everything ready when I call so I don't waste the opportunity once I finally get through to the right people. Thanks to everyone who shared their experiences and solutions. This community support is honestly more helpful than anything I've gotten from multiple IRS customer service calls!

This thread highlights exactly why TFSA reporting is such a nightmare for US taxpayers! The lack of clear IRS guidance creates this ridiculous situation where everyone's guessing and potentially facing massive penalties. I went through this same confusion two years ago and ended up taking the conservative approach - filed Forms 3520/3520-A for my TFSA even though it felt like overkill. Cost me about $1,200 in CPA fees, but I sleep better at night knowing I won't get hit with a surprise penalty. What really bothers me is that the IRS could easily clarify this with official guidance but chooses not to. Meanwhile, thousands of dual citizens are stuck making expensive decisions based on incomplete information. The fact that someone like Sofia's brother-in-law can get penalized $10,000 and then have it reversed on appeal just shows how arbitrary this whole system is. For anyone still deciding: document whatever approach you take and make sure you can justify it. Whether you file as a trust or just report the income, having a clear rationale based on your specific TFSA structure is crucial if you ever face questions later.

I've been dealing with this TFSA reporting headache for three years now and finally found a approach that works. After getting burned by conflicting advice from multiple CPAs, I started documenting everything myself. Here's what I learned: the IRS looks at specific features of your TFSA to determine if it's a trust. Key factors include whether you can direct specific investments (beyond choosing from a menu of funds), if there are any beneficiary designations that create complex arrangements, and whether the Canadian institution has discretionary authority over your funds. For my straightforward TFSA with just index funds at RBC, I report it as a foreign financial account - income goes on my 1040, account gets reported on FBAR, no Forms 3520/3520-A needed. I keep detailed records of my reasoning and all the IRS guidance I relied on. The peace of mind comes from having a defensible position based on the actual characteristics of MY specific account, not generic advice that may not apply to everyone's situation.

Don't forget about the Qualified Business Income deduction (Section 199A)! If your tattoo shop is a sole proprietorship, you might qualify for up to a 20% deduction on your QBI. This is separate from your regular business expenses.

I've been through the exact same situation with my small business! One thing that really helped me was setting up a separate business savings account specifically for taxes. I automatically transfer 30% of each payment I receive into that account - it covers both the self-employment tax and income tax, plus gives me a small buffer. Also, make sure you're tracking EVERYTHING as a business expense - your business insurance, any professional memberships, bank fees for your business account, even the mileage when you go to buy supplies. Those small expenses really add up and can significantly reduce your taxable income. For next year, definitely start making quarterly estimated payments. The IRS has a safe harbor rule where if you pay 100% of last year's tax liability (110% if your income was over $150k), you won't owe penalties even if you end up owing more when you file. This gives you some peace of mind while you're figuring out your cash flow.