I hate how the IRS treats small S-Corps with these insane penalties! My brother-in-law has a 1-person S-Corp, filed 4 months late (busy with actual real work lol) and got hit with $840 in penalties even though he owed ZERO tax. It's absolutely ridiculous.

I completely understand your frustration! As someone who's dealt with S-Corp filings for several years, I can confirm that yes, the penalties apply even when there's no tax liability. The $210 per shareholder per month penalty is automatic under IRC Section 6699. A few key points for your situation: - The penalty starts accruing from the day after the original due date (March 15th for calendar year S-Corps) - It applies for up to 12 months maximum - Drake should calculate this penalty, but definitely verify it manually One thing that might help your client: if they have a clean filing history for the past 3 years, they may qualify for first-time penalty abatement. Also, if there were legitimate circumstances that prevented timely filing (like their previous accountant's issues), they could potentially argue "reasonable cause" for penalty relief. My advice: file the current year return ASAP, and consider submitting a penalty abatement request with a detailed explanation of the circumstances. Even if partially successful, it could save your client hundreds or thousands in penalties.

I used TurboTax for my father's estate and it was fine, but only because it was pretty straightforward. His estate just had a checking account, some stocks, and an IRA that went directly to beneficiaries. TurboTax Business has a section for fiduciary returns that works for Form 1041. With your situation having a small business being liquidated, that's a red flag to me that you might need professional help. Business liquidation involves asset sales, potential capital gains, depreciation recapture, and inventory valuation that can get complex fast. Maybe consider a middle ground - use a CPA for this first year while the business liquidation is happening, then if there's ongoing estate administration in future years, you might be able to handle it yourself.

As someone who's been through this process twice as an executor, I'd strongly recommend getting professional help for your first estate return, especially with that business liquidation involved. The business assets create complexity around depreciation recapture, inventory valuation, and proper timing of income recognition that can really trip you up. Here's what I'd suggest: get a consultation with a CPA who specializes in estates (not just any CPA - make sure they regularly handle Form 1041). Many will do an initial consultation for $200-300 where they can review your situation and give you a firm quote. With assets totaling around $640k including a business, you're looking at potential tax consequences that make professional guidance worthwhile. The peace of mind factor is huge too - as executor, you have fiduciary responsibility to handle things correctly. I made some costly mistakes on my first estate return trying to DIY it, and learned the hard way that estate tax rules are very different from personal tax rules. For subsequent years if the estate has ongoing simple income, then you might consider handling it yourself, but for this first year with the business complexity, invest in getting it done right.

Just to clarify, Form 5329 has multiple parts and isn't just for early distributions. It's also used for excess contributions to IRAs, excess accumulations (not taking RMDs), etc. So depending on your situation, you might need different parts filled out.

I ran into this exact same issue with Credit Karma Tax last year! The software can be really finicky about generating Form 5329. A few things that helped me get it to work: 1. Make sure you answered "Yes" when it asks if you received any retirement plan distributions 2. Double-check that you entered the correct distribution code from your 1099-R (should be code 1 for early distribution) 3. When it asks about the reason for the distribution, be very specific - don't just say "personal use" if that's what happened The form IS required for any early distribution, regardless of whether you qualify for an exception. If you do qualify for an exception, that's where you'd claim it on the form to avoid the 10% penalty. If Credit Karma still won't cooperate, you can always download Form 5329 directly from the IRS website and fill it out manually. Just make sure to include it with your return and transfer the additional tax amount to line 17 of your Form 1040. Sometimes the manual approach is actually easier than fighting with buggy software!

Does anyone know which forms I need to fill out to claim these startup costs? I'm using TurboTax and it's not clear where to enter this information.

The timing confusion you're experiencing is really common! Since you spent the money in 2023 but didn't start generating income until 2024, you'll want to take the startup cost deduction on your 2024 tax return. The IRS considers your business to have "begun operations" when you first started providing services and earning income, not when you incurred the expenses. So you can deduct up to $5,000 of your startup costs directly on your 2024 return, and the remaining $2,200 would need to be amortized over 15 years starting in 2024. Don't amend your 2023 return - that would actually be incorrect since your business wasn't considered "active" yet according to IRS definitions. Make sure to keep all your receipts from 2023 as documentation for these startup expenses, even though you're claiming them in 2024. The key is when your business began operating, not when you paid for the expenses.

Definitely report it! I didn't report an inherited property sale a few years ago because it sold for less than the appraised value at death. Ended up getting a letter from the IRS asking about it, and had to go through the hassle of amending my return. Even though you don't owe any taxes, the title company reports the sale to the IRS on a 1099-S form, so they know about the transaction. Better to report it properly the first time than deal with questions later!

Just went through this exact situation with my grandmother's house last year! Even though we had no capital gains (actually a small loss), our tax preparer emphasized that we absolutely had to report it. The IRS gets a copy of the 1099-S from the title company showing the sale, so they'll be expecting to see it on your return. One tip that saved us some headaches - make sure you have clear documentation of the stepped-up basis. We used the estate's formal appraisal, but I've heard some people successfully use other methods like comparative market analysis if done close to the date of death. Since there are multiple siblings involved, each of you will report your portion of the sale on your individual tax returns. So if you inherited equal shares, you'd each report 1/3 of both the sale price and the stepped-up basis. Definitely smart to get professional help for this year - inherited property sales have some nuances that are worth getting right the first time!