I'm going through this exact same nightmare right now! Just received my LTR 2645 C letter this morning and had that immediate sinking feeling in my stomach, especially since we already received our refund back in February ($2,018). This entire thread has been absolutely invaluable - I had no idea this was such a widespread issue affecting so many taxpayers! Before stumbling across this discussion, I was convinced we had made some major error on our return or that the IRS was going to demand their refund back with penalties. It's honestly infuriating that in 2025, the IRS can have sophisticated systems that successfully process millions of returns and distribute refunds accurately, but then can't manage basic coordination between their own internal systems. How do you approve a return, send out the refund, but then weeks later have a completely separate system sending letters saying the return needs additional review? It's like the left hand has no idea what the right hand is doing. Reading through all the successful call experiences shared by both taxpayers and tax professionals here, I'm definitely calling first thing tomorrow morning using the direct number on the letter. It's frustrating that we have to spend our valuable time cleaning up their system glitches, but at least now I know exactly what to expect and that the agents are very familiar with this widespread coordination failure. Thank you so much to everyone who took the time to share their experiences and outcomes - this community has been infinitely more helpful than anything available on official IRS resources. It really demonstrates how powerful community support can be when dealing with government system failures!

I'm going through this exact same situation right now! Just received my LTR 2645 C letter two days ago and immediately panicked, even though I already got my refund back in March ($2,956). Reading through everyone's experiences in this thread has been such a huge relief - I had no idea this was happening to so many people! It's absolutely mind-boggling that the IRS can successfully process returns, approve refunds, and send out payments, but then their notification system is completely disconnected sending out review letters weeks later. I was up all night googling this letter thinking I had somehow messed up our taxes or that they were going to demand the money back. Finding this community discussion with so many people in identical situations has completely changed my perspective from panic to frustration at their system incompetence. Based on all the successful call experiences shared here, I'm definitely calling first thing tomorrow morning using the number on the letter. It's annoying we have to spend time fixing their system glitches, but at least now I know what to expect and that the agents are familiar with this widespread coordination failure. Thank you to everyone who shared their experiences and outcomes - this thread has been more helpful than anything I could find on official IRS resources. Really shows how valuable community support is when dealing with government system failures!

One additional consideration that might be helpful - make sure to review your S-corp election timing and any potential Section 1202 Qualified Small Business Stock (QSBS) benefits. If your LLC made the S-corp election early enough and you've held your interest for at least 5 years, you might qualify for the QSBS exclusion which could eliminate federal taxes on up to $10 million of the gain (or 10x your basis, whichever is greater). This would be even better than just avoiding the 3.8% NIIT - it could potentially eliminate the entire federal capital gains tax on your $875K gain. The QSBS rules are complex and have specific requirements around when the election was made, the type of business, and how the stock was acquired, but it's definitely worth having your accountant review this when they return. Also, since you mentioned multiple owners, each owner can potentially claim their own $10M QSBS exclusion, so the total benefit for your group could be substantial. This is one of those situations where the entity structure (LLC electing S-corp treatment) might actually work in your favor for tax planning purposes.

Looking at your situation, you're in a really strong position to avoid the 3.8% NIIT on your $875K gain. Since you've been actively involved in running the business since 2018, you almost certainly meet the material participation requirements that exempt you from NIIT. A few key points based on the great discussion above: **Material Participation** - With 6+ years of active involvement, you likely qualify under multiple tests (500+ hours annually, substantially all participation, or the 5-of-10 years test). The LLC/S-corp structure doesn't change this fundamental exemption. **Documentation Priority** - Start gathering evidence of your participation NOW: emails showing business decisions, calendar entries, meeting minutes, travel records, contracts you signed, etc. Even without perfect hour logs, multiple types of evidence showing consistent involvement will be convincing. **QSBS Potential** - This could be huge! If your LLC made the S-corp election early and you've held your interest since 2018, you might qualify for Section 1202 QSBS exclusion. This could eliminate federal taxes on your entire $875K gain (not just the 3.8% NIIT). Given the potential $131K+ in tax savings, consider having your accountant prioritize this analysis even if they're on vacation. **Next Steps** - Gather all formation documents, S-corp election paperwork, and ownership records. Document your business activities timeline. If QSBS doesn't apply, the material participation exemption alone should save you about $33K in NIIT. With the sale in 6 weeks, time is critical but you have multiple strong paths to significant tax savings. This is definitely worth expediting professional review!

Congratulations on reaching the funded status! As someone who's dealt with international tax situations, I can add a few practical points to what others have shared: The SBTPG funded status with trace number essentially means your refund has cleared the IRS approval process and is now in the final banking pipeline. Since you're filing from abroad, here's what I'd recommend: • Contact your bank proactively to let them know you're expecting a US government transfer - this can prevent any holds or delays • The trace number format should be 15 digits - if it's different, double-check you're looking at the right field • International banks sometimes require additional documentation for large government transfers, so having your tax return summary ready can help • Consider setting up account alerts so you're notified immediately when the deposit hits From my experience, once SBTPG shows funded, the failure rate is essentially zero. Your money is in the system and will arrive. The trace number is your insurance policy - it proves the transaction exists if there are any banking hiccups along the way. Since you mentioned being extra cautious about the process going smoothly, you might also want to confirm with your bank what their cut-off times are for processing incoming international transfers. Some banks only process these during specific windows, which could affect timing. You're in the home stretch now! 🌟

As an international filer who's been through this exact SBTPG funded status situation, I can tell you that you're basically home free at this point! The funded status with trace number means the IRS has already sent your money to SBTPG and they've initiated the transfer to your bank. Since you're filing from abroad, here's what I learned from my experience: • The trace number is crucial for international transfers - your bank may ask for it to verify the source of funds • Expect 2-4 business days for the money to hit your international account (slightly longer than domestic due to additional banking verification) • Some international banks automatically hold large government transfers for 24-48 hours as a fraud prevention measure • The SBTPG system is very reliable once it shows funded - I've never seen anyone not receive their money after reaching this status I'd recommend calling your bank's international transfer department to give them a heads up that you're expecting a US tax refund. This can prevent unnecessary holds or delays. Also, keep that trace number handy - it's basically your receipt that proves the transaction is legitimate. The waiting is the hardest part, but you're literally days away from having your refund! The system works, it's just a matter of letting the international banking process complete. 🎯

Great question! I had a similar concern when I was looking for tax help last year. Beyond what others have mentioned about state boards and NASBA's CPAverify, I'd also recommend checking if they have a PTIN (Preparer Tax Identification Number) through the IRS directory. Anyone who prepares tax returns for compensation must have one. You can search the IRS "Directory of Federal Tax Return Preparers with Credentials and Select Qualifications" online. This will show you if they're authorized to practice before the IRS and what type of credentials they hold (CPA, EA, attorney, etc.). Also, don't be afraid to ask them directly about their credentials during your initial consultation. A legitimate CPA should be happy to provide their license number and state of licensure upfront. If they're evasive or reluctant to share this basic information, that's a red flag. One more tip: if they're charging unusually low fees compared to other CPAs in your area, be cautious. Quality tax preparation by a licensed professional costs money, and if the price seems too good to be true, it often is.

Just want to add another verification step that saved me from a scammer - check if they're listed with the Better Business Bureau and look up reviews on Google. A legitimate CPA should have some kind of online presence and client feedback. I almost hired someone who had all the right credentials on paper, but when I searched their business name, I found multiple complaints about poor service and missed deadlines. Their CPA license was valid, but their business practices were terrible. Also, if you're working with someone remotely (which is pretty common now), ask for references from other clients. A good CPA won't have any problem providing a few references, especially for complex tax situations. Most of my best professional relationships started with a referral from someone who had a similar tax situation. One last thing - trust your gut. Even if all the credentials check out, if something feels off during your initial consultation, keep looking. There are plenty of qualified CPAs out there, so don't settle for someone who makes you uncomfortable or doesn't seem to understand your specific needs.

I went through this exact same confusion when I started my S Corp two years ago! Your accountant is absolutely correct - S Corps do need to issue 1099-NECs to qualifying service providers, but the key word is "qualifying." Here's what helped me sort through the maze: Start by understanding that you DON'T need to issue 1099s to corporations, LLCs taxed as corporations, or for payments made via credit card/third-party processors. This eliminates a lot of vendors right off the bat. For your entertainment industry expenses like hair/makeup, these can absolutely be legitimate business deductions if they're specifically for performances, auditions, or professional appearances. Just make sure you can document the business purpose - I keep notes linking each service to specific gigs or professional events. The W-9 collection process gets easier once you establish it as standard practice. I now require W-9s before making any payments over $100 to new vendors. Most professionals understand this is normal business procedure, though some personal service providers might need a gentle explanation about why you need their tax info. Don't feel bad about not knowing this initially - the entertainment industry is notorious for informal payment practices, but as an S Corp you need to follow corporate tax rules. It's a learning curve but you'll get the hang of it!

I'm just starting my S Corp journey too and this thread has been incredibly helpful! I was literally panicking yesterday when my accountant handed me a similar list of vendors who need 1099s. One thing I'm still confused about - if I paid someone like $400 in cash for makeup services throughout the year but then also Venmo'd them $300 for additional work, does that $700 total mean they need a 1099? Or since the Venmo portion might be handled by the payment processor, do I only count the cash payments toward the $600 threshold? Also, for those of you who've been through this process - how far back do you typically keep records of these vendor payments? I'm trying to organize everything for this year but also wondering if I should be worried about prior years before I had the S Corp set up. Thanks for sharing all your experiences - it's making this whole learning curve feel way less intimidating!