Just to add a real-world example - my company had a partial audit last year that included our meal expenses. We had a mix of casual lunches ($20-30 per person) and some high-end dinners ($200+ per person). The IRS didn't question the actual amounts but focused entirely on whether we had documented the business purpose and attendees. They disallowed several deductions where we had the receipt but couldn't provide notes on what business was discussed or only had first names of the attendees. The expenses they approved included both McDonald's meals and fancy dinners - the documentation was what mattered, not the price point.

As someone who works in tax compliance, I want to emphasize that the "ordinary and necessary" standard is really the key here. The IRS Publication 463 states that meal expenses cannot be "lavish or extravagant under the circumstances," but this is intentionally subjective. In practice, what I've seen trigger audits isn't necessarily the dollar amount, but rather patterns that don't make business sense. For example, consistently expensive meals with the same "client" might raise questions about whether these are actually personal expenses. A few practical tips: 1) Keep contemporary records - don't try to recreate documentation months later, 2) Note the specific business discussed, not just "client meeting," 3) Include full names and business relationships of all attendees, and 4) Be consistent with your industry norms. The $15 McDonald's lunch and $2000 steakhouse dinner can both be perfectly legitimate deductions if properly documented and appropriate for your business context. Focus on the documentation requirements rather than worrying about arbitrary dollar thresholds.

Has anyone ever been audited for not reporting tiny amounts of interest? I mean, if we're talking about $2-3 in some old account, is the IRS really going to care? Asking for a friend 😬

Just to add to what others have said about the reporting thresholds - I work in banking compliance and can confirm that banks are required to file information returns (Form 1099-INT) with the IRS for ANY amount of interest paid, regardless of how small. The $10 threshold only determines whether they're required to send YOU a copy. So even if you earned $2 in interest and didn't get a 1099-INT in the mail, the bank still reported that $2 to the IRS. This means their computers will expect to see that income on your tax return. The good news is that for small amounts under $1,500 total, you can just report the total on Line 2b of Form 1040 without having to fill out Schedule B. But definitely don't skip reporting it entirely - the IRS matching system is pretty sophisticated these days and will catch discrepancies, even small ones. For your situation with multiple inactive accounts, I'd recommend calling each bank's customer service line. They can usually provide you with a year-end interest summary over the phone, which will save you from having to dig through months of statements.

Based on your situation, using the county tax assessment of $235,000 as your step-up basis should be perfectly acceptable to the IRS. The fact that you sold for $243,000 three years later actually supports that the assessment was reasonably accurate - that's only about a 3.4% appreciation over three years, which is quite reasonable given normal market conditions. The IRS doesn't require a formal appraisal for inherited property; they just want to see that you made a good faith effort to determine fair market value at the date of death. County tax assessments are specifically mentioned in IRS publications as one acceptable method. To strengthen your documentation, I'd recommend keeping a simple file with: the official county assessment from 2021, any information about your county's assessment practices (whether they assess at full market value or use a percentage), and maybe a few comparable sales from that time period if you can easily find them online. Since your numbers are so reasonable and close together, I wouldn't worry too much about this triggering any red flags. The IRS is mainly looking for obvious discrepancies or situations where someone clearly undervalued property to avoid taxes.

I'm in a very similar boat with my mother's property that we inherited in 2023. Reading through all these responses has been incredibly helpful! One thing I want to add from my experience is that it's worth checking if your state has any specific rules about using tax assessments for inheritance purposes. In my state, I discovered that the county assessor's office actually keeps records of their "market value estimates" separate from the assessed value used for taxes. When I called them, they were able to provide me with both numbers from 2023, and the market value estimate was about 8% higher than the tax assessment. This gave me a more defensible FMV number that was still based on official county records. Also, since you mentioned this is for three siblings, make sure you're all using the same basis calculation method for consistency. The IRS would definitely notice if siblings reported different stepped-up basis amounts for the same inherited property! Your situation with the assessment at $235K and sale at $243K after three years actually looks very reasonable. That level of appreciation is totally normal and shouldn't raise any eyebrows.

I'm dealing with a very similar CP2000 situation right now and wanted to share what I've learned so far. Like you, I got blindsided by a notice for unreported gambling winnings even though I had significant net losses for the year. One thing that's helped me understand the process better is that the IRS essentially treats gambling winnings and losses as two separate line items - you report ALL winnings as income (line 8b on Form 1040), then separately claim your losses as an itemized deduction on Schedule A, but only up to the amount of your winnings. The most important thing I've discovered is documentation timing. Don't wait - start gathering your records immediately because some casinos have limited retention policies for older data. I almost lost access to records from a smaller casino that was going to purge their 2022 data next month. Also, consider whether you had any other itemizable deductions that year (mortgage interest, charitable donations, state taxes, medical expenses over 7.5% of AGI). If your total itemized deductions including gambling losses exceed your standard deduction, you'll be in much better shape. If not, you might still owe some tax even with documented losses, but it should be significantly less than what the CP2000 is claiming. The key is responding within that 30-day window with comprehensive documentation. You're definitely not screwed - this is a fixable situation!

This is exactly what happened to me in 2022! I was terrified when I got my CP2000 notice for $19,000 in unreported gambling winnings, especially since I knew I was down overall for the year. The key thing that saved me was being extremely thorough with documentation. I gathered win/loss statements from every single casino I visited (even ones where I only played once), printed bank statements showing ATM withdrawals at casinos, and created a detailed spreadsheet matching my losses to specific dates and locations. One thing I wish I'd known earlier - when you respond to the CP2000, include a cover letter that clearly explains your situation and references all the documentation you're providing. I wrote something like "Enclosed are win/loss statements from [list all casinos] showing total documented losses of $X against reported winnings of $Y, resulting in net gambling losses for tax year 2022." The IRS accepted my response and reduced my tax liability to zero within about 8 weeks. The relief was incredible! Also, definitely get started on your 2023 taxes ASAP if you had the same reporting issue. I filed an amended return for 2023 proactively and avoided getting a second CP2000 notice. It's so much less stressful to handle it voluntarily rather than waiting for another scary notice in the mail. You've got this - just stay organized and respond within their deadline!

I'm a CPA who specializes in tax issues for foster families, and I want to emphasize that you're absolutely correct - foster care payments should NOT be subject to 1099-NEC reporting. This is unfortunately a very common error I see across multiple counties nationwide. The problem stems from their payment systems treating all disbursements over $600 as potentially taxable contractor payments. Here's my recommended action plan: 1) Call the county's finance department TODAY and reference IRC Section 131 and IRS Publication 525, pages 16-17. 2) Request to speak with both the Foster Care Program Supervisor AND their tax compliance officer on the same call. 3) Email them the relevant IRS documentation immediately after your call. 4) Get any correction or acknowledgment of error in writing. If they still issue the incorrect 1099-NEC, don't panic. You can still file your return correctly by excluding the income and attaching Form 8275 with a clear explanation referencing IRC 131. I've helped dozens of foster families through this exact situation, and it always gets resolved - it just takes persistence and the right documentation. Your health issues are stressful enough without adding incorrect tax forms to the mix!

I'm dealing with this exact same issue and I'm so grateful you posted this question! My county just sent me a similar notice about issuing a 1099-NEC for my foster care payments, and I was completely confused since I also thought these were non-taxable reimbursements. Reading through all these responses has been incredibly educational - it's clear this is a widespread problem with county finance departments not understanding the tax treatment of foster care payments. I'm planning to call my county's finance department first thing Monday morning with all the documentation everyone has mentioned (IRC Section 131, Publication 525 pages 16-17) and request to speak with both the Foster Care Program Manager and their tax compliance team at the same time. It's frustrating that we have to become tax experts to deal with what should be straightforward reimbursements, but at least now I feel prepared to advocate for the correct treatment. I really hope both of us can get this resolved before they actually send out the incorrect forms. Thanks again for bringing this up - you've definitely helped more foster parents than just yourself!