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Typical IRS... they expect us to file on time but cant even keep their website working properly š
I had this same issue last week! What finally worked for me was using an incognito/private browsing window. Something about the cookies or cached data was interfering. Also make sure JavaScript is enabled - the transcript button won't work without it. Hope this helps!
This thread has been incredibly helpful! I'm dealing with a very similar situation with my single-member LLC (taxed as a disregarded entity) where I purchased a vehicle thinking I'd use it heavily for business, but ended up with only about 15% actual business use. One thing I'm curious about that hasn't been addressed - how does this scenario differ for single-member LLCs versus partnerships? Since there are no guaranteed payments in a disregarded entity situation, would the personal use portion just be treated as a non-deductible personal expense, with only the 15% business portion being deductible? Also, for those who mentioned selling the vehicle from the LLC to yourself personally - what's a reasonable way to determine fair market value? Would getting a KBB estimate be sufficient, or do you need a formal appraisal? I'm trying to avoid any issues with the IRS questioning whether the sale price was arm's length. The documentation requirements everyone mentioned are definitely eye-opening. I've been pretty casual about tracking my business miles, but it sounds like I need to get much more rigorous about contemporaneous record-keeping, especially with such low business use percentages.
Great question about single-member LLCs! You're absolutely right that the treatment is different since there are no guaranteed payments in a disregarded entity. For your situation, the LLC can only deduct the 15% business portion of vehicle expenses, and the 85% personal use portion is simply non-deductible - it doesn't create taxable income to you like it would in a partnership structure. This actually makes the tax treatment cleaner in some ways. Regarding fair market value for selling the vehicle to yourself, KBB or Edmunds estimates are generally acceptable for most situations, especially if the vehicle is a common make/model. You might want to get estimates from multiple sources (KBB, Edmunds, maybe even a local dealer) and document your methodology. A formal appraisal is usually overkill unless it's a very expensive or unusual vehicle. The documentation piece really can't be overstated - with such low business use percentages, the IRS will be particularly skeptical if audited. I'd recommend starting a mileage log immediately even if you're considering selling the vehicle personally, just to establish a clear pattern of your actual business use going forward.
This has been such an insightful discussion! I'm dealing with a similar situation but with an additional wrinkle - my LLC purchased a hybrid vehicle and I'm wondering if the various electric vehicle tax credits complicate the business vs. personal use allocation. From what I understand, if the LLC claimed the commercial EV tax credit when purchasing the vehicle, does that affect how we need to handle the personal use portion? I've been using the car about 20% for business and 80% personal, so I'm in a similar boat as the original poster. I'm also curious about the insurance implications that haven't been mentioned yet. My business insurance covers the vehicle, but if I'm using it 80% for personal use, am I potentially creating coverage issues? Should the personal use portion be covered under a personal auto policy instead? The recommendation to sell the vehicle to myself personally is starting to sound very appealing given all the complexities everyone has outlined. With such low business use, the administrative burden seems to far outweigh any tax benefits!
Something nobody mentioned - depending on what kind of settlement this was, it might not even be taxable income! I had a personal injury settlement and didn't have to pay taxes on it at all. What was your class action for?
This is a really important point. If the settlement was for physical injuries, it's usually not taxable. But if it was for emotional distress, punitive damages, or something like lost wages or a data breach, then it generally is taxable. The type of 1099 can give a clue too - 1099-MISC in box 3 usually means taxable.
I went through something similar with a consumer protection class action settlement last year. One thing that helped me was looking at the settlement notice that was posted on the court's website - it usually has the full fee arrangement spelled out. In my case, the attorneys took 33% plus expenses, which wasn't clearly shown on my 1099-MISC either. I ended up having to calculate it myself based on the settlement notice. Make sure when you report the attorney fees as a deduction that you have documentation to back it up in case the IRS asks questions later. Also, keep in mind that if this was a punitive damages settlement (like for a data breach or consumer fraud), it's definitely taxable income. But if any portion was for actual damages or reimbursement of losses you incurred, that part might not be taxable. The settlement paperwork should specify what each portion represents.
Make sure you're using the right filing address! This bit me last year when I was in your situation. The IRS has different mailing addresses depending on if you're enclosing a payment or not, and they also vary by state. I sent mine to the wrong place and it delayed my refund by TWO MONTHS! š” Check this page for the right address: https://www.irs.gov/filing/where-to-file-paper-tax-returns-with-or-without-a-payment
Omg this! I made the same mistake last year and it was a nightmare tracking down my return. The worst part was that no one could tell me where it was for like 6 weeks. I kept calling and they just said "it's still being processed" with no other info.
I'm in almost the exact same situation! My husband is from Germany and only visits the US a few times a year. We've been paper filing for the past two years and it's definitely annoying, but it becomes routine after the first time. One thing I learned that might help you - when you mail your return, include a brief cover letter explaining your situation (married filing separately with non-resident alien spouse who doesn't have SSN/ITIN). This helps the IRS processors understand why you're paper filing and can speed up the review process. Also, definitely send it certified mail with tracking like others mentioned. Last year my return took about 7 weeks to process, which isn't too bad considering they have to manually review it. If you're planning to move to the UK eventually anyway, it might not be worth the hassle of getting your husband an ITIN. But if you'll be filing US taxes for several more years, it could be worth considering since it would let you go back to e-filing. Good luck with your first paper filing! It's not as scary as it seems once you get everything organized.
Thanks for sharing your experience! The cover letter tip is really helpful - I wouldn't have thought of that on my own. Seven weeks for processing doesn't sound too terrible, especially knowing it's being manually reviewed. Quick question - when you include the cover letter, do you just put it on top of your forms or do you attach it in a specific way? And do you address it to anyone in particular or just keep it general? I want to make sure I do this right since it's my first time paper filing! Also totally agree about not bothering with the ITIN if we're moving to the UK eventually. Seems like unnecessary paperwork for something temporary.
Chloe Zhang
Has anyone else noticed that this seems to be happening more often lately? I returned something to HomeGoods last week and they tried to keep the tax too. When I questioned it, they suddenly "found a way" to refund the full amount. I think some retailers are trying this as a sneaky profit tactic hoping people don't notice or complain.
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Brandon Parker
ā¢I work in retail (not naming the store) and can confirm some places are starting to do this intentionally. Our system was recently updated to default to "tax retained" on returns unless the manager overrides it. Most customers don't notice the small difference, especially on cheaper items. Probably doesn't help my job security to admit this but it feels dishonest.
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Teresa Boyd
This is really concerning if retailers are systematically doing this. I work in tax compliance and can tell you that what BigTech Store told you is absolutely incorrect. Sales tax refunds on returned merchandise are governed by state law, not store policy. When you return an item, the original transaction is essentially being reversed. The store collected that tax as an agent of the state - they don't get to keep it when the underlying sale is canceled. Most states have specific provisions requiring retailers to refund sales tax on returned items, and failure to do so can result in penalties for the retailer. I'd recommend going back with your receipt and asking to speak with a manager. If they refuse, you can file a complaint with your state's department of revenue. They take sales tax compliance seriously and will investigate retailers who aren't following proper refund procedures. The fact that some commenters are seeing this happen more frequently suggests this might be a deliberate policy at some chains, which is even more problematic from a regulatory standpoint.
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Grace Johnson
ā¢Thanks for the detailed explanation from a compliance perspective! This is exactly the kind of professional insight I was hoping to find. The fact that you mention this could be a deliberate policy at some chains is really alarming. I'm definitely going back to BigTech Store with this information. Do you happen to know if there's a specific timeframe I need to file a complaint with the state department of revenue if they continue to refuse? And would it help to document the conversation or get something in writing from them about their "policy" of keeping sales tax on returns? I'm also wondering if this affects their sales tax remittance to the state - like are they essentially double-dipping by keeping customer refunds AND potentially not adjusting their tax payments to the state?
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