Splitting Hackathon Prize Money to minimize tax debt
I would deduct all the other payments out as subcontractors, but I typically have all the paperwork and entities set up to make that applicable. In Turbotax I do this with as subcontracting expense under my business entity, but for the IRS the categories of the deductions do not matter This isn't tax advice, it is what I would do, and how I would defend it under an audit. Everyone else that was paid also needs to report it. The lack of reciprocal filing (you deducted income paid to someone else, the person did not report that income, or reported it in a different way) is a number one thing to trigger IRS scrutiny. Although accurate, you need to be aware that you are shifting the tax burden away from yourself, by deducting it. A simple option is to ask your teammates to send you their portion of the tax bill. This option makes everyone's taxes easier, especially since it is very likely that they have already sent in their tax returns. I would just take $2000 and multiply by your marginal tax rate, weight that between the 5 other people according to their share of the prize money and ask them to give you that. From your question it seems like you all have a good working relationship, I'm sure the other partners would agree to that. I think it's the simplest solution that is also fair and equitable. Basically, you pay the tax on 2000 and they pay you back for their share of the tax. Much easier than trying to pass it through your tax return for 5 separate people for a minimal amount of $'s. In hindsight, the best way to do it would have been to 1099 the person with the lowest marginal tax rate for the year to minimize the total tax paid on the 2000. Probably only would've been a few dollars difference but still the most efficient way to do it.
That's really not something that can be answered based on the information provided. There are a lot of factors involved: type of income, your wife's tax bracket, the split between Federal and State (if you're in a high bracket in a high income-tax rate State - it may even be more than 50%), etc etc. The fact that your wife didn't withdraw the money is irrelevant. S-Corp is a pass-through entity, i.e.: owners are taxed on the profits based on their personal marginal tax rates, and it doesn't matter what they did with the money. In this case, your wife re-invested it into the corp (used it to pay off corp debts), which adds back to her basis. You really should talk to a tax adviser (EA/CPA licensed in your State) to learn how S-Corps work and how to use them properly. Your wife, actually, as she's the owner. "Your friend probably cannot deposit the check to your U.S. bank account. U.S. banks that I've worked with will not accept a deposit from someone who is not an owner of the account. I don't know why not. If some stranger wants to make unauthorized deposits to my account, why should I object? But that's the common rule.  You could endorse the check, your friend could then deposit it to his own account or cash it, and then transfer the money to you in a variety of ways.  But I think it would be easier to just deposit the check in your account wherever it is you live. Most banks have no problem with depositing a foreign check. There may be a fairly long delay before you can get access to the money while the check clears through the system.  I don't know exactly what you mean by a ""prize check"", but assuming that this is taxable income, yes, I assume the U.S. government would want their hard-earned share of your money. These days you can pay U.S. taxes on-line if you have a credit card. If you have not already paid U.S. taxes for the year, you should make an ""estimated payment"". i.e. you can't wait until April 15 of the next year, you have to pay most or all of the taxes you will owe in the calendar year you earned it." "Close... Warning, I may be off a bit here; I'm sure someone will correct me if so. Traditional 401k or IRA: money goes in pre-tax (so, yes, you avoid paying tax on it now), grows untaxed, taxes are due when you retire and start taking money back out of the account -- but your income, including these withdrawals, is likely to be lower than your peak earning years so your tax rate will be lower. You don't avoid all the tax, but you delay it and hopefully reduce it, and by doing so there's more money in your account earning returns. Roth 401k or IRA: money goes in after taxes (you do pay income tax now). However, all returns on the money are untaxed (I believe), and you pay no tax when you're eligible to withdraw the funds.  Either or both kinds of 401k may be eligible for some percentage of matching funds from your employer (there are some incentives for them to offer this benefit). I believe that even if you're doing a Roth 401k, the matching funds legally have to go in as traditional plan. And yes, as that implies, it is possible to split your contribution between the two styles. Note: the matching funds are ""free money."" If your plan offers a match, it is highly recommended that you contribute enough to your 401k to capture the maximum match." "It comes down to the resolution you want to have on your personal finances.  A package like GNUCash allows you to easily answer questions like ""Exactly how much do I spend on interest per month/year/decade.""  Same with pretty much any other expense, liability or asset you have whether it be taxes, utilities, your home equity or your net worth.  The other tools you mention are nice, and certainly convenient, but they tend to lump things together in broad strokes and omit many categories altogether (taxes).  Ultimately by having such a fine grained accounting tool, you can target small or large things to better budget your money.   Another thing a package like GNUCash provides is a single, private place to consolidate all of your finances.  This is nice for things like net worth and asset accounts that you might not want to give a company access to. Finally, GNUcash in particular helps normal people think like accountants.  Rather than lump everything into 'income' and 'expenses', once you start using GNUCash you'll start thinking in terms of equity, liabilities, net-worth and assets in addition to income and expenses.  This gives me a much more accurate view of my finances and helps me better target areas for improvement.  In short, it helps me to see the broader picture which helps me to keep my eye on the prize - which of course is to not have to worry about money at all." I'm not certain I understand what you're trying to do, but it sounds like you're trying to create a business expense for paying off your personal debt. If so - you cannot do that. It will constitute a tax fraud, and if you have additional partners in the LLC other than you and your spouse - it may also become an embezzlement issue. Re your edits: Or for example, can you create a tuition assistance program within   your company and pay yourself out of that for the purposes of student   loan money. Explicitly forbidden. Tuition assistance program cannot pay more than 5% of its benefits to owners. See IRS pub 15-B. You would think that if there was a way to just incorporate and make your debts pre-tax - everyone would be doing it, wouldn't you? I think these systems of wealth re-allocation is where the heart of the debate about the American economy is or should be. Should we have our government intervene and re-allocate wealth in some way? It already does to some degree, although arguably in a bad way. It's much easier to avoid taxes when you can pay for the sort of expert good at avoiding that sort of thing. Middle/Poor class individuals end up paying more taxes relative to their income further exacerbating wealth inequality. I think it was Bill Gates and probably many others that have mentioned that one of the best ways to get money to underutilized market participants is by investing in businesses who then employ people.  I think the concern with the American economy and everything else dependent to it is that the mechanisms/pipelines for enabling the poorly utilized are outgunned by the mechanisms/pipelines for taking the money from the poor/middle class and putting it in the hands of the rich. Loan-based financial products are the biggest offenders I think. If only hypothetically I would like to see what an economy would look like if loans were simply not an option, or if the idea of merit qualifying a person for a loan/financing were significantly more accurate. First, I believe that you can't just divide the losses over a number of years. I know that would be ideal as it might let you use the losses to only offset 25% income. A loss that gets you below zero taxable income would carry forward to the next year.  That said, I think it would be a great strategy to use the loss to offset a Roth conversion, in your case, from the traditional 401(k) to Roth 401(k). Keep in mind, as you've seen from using the 2016 tax year TurboTax, you should be able to make a fairly good estimate for your 2017 return. This could effectively use all of the loss to offset 25% income.  I'd look at the current projection and convert say 75-80% of the target amount immediately, then in November when the 2017 software comes out, convert the rest to get as close to your goal as you can. 2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.