I work at a tax preparation office and we've been seeing these scam letters constantly this year. Real IRS letters will have: - A notice number (CP###) or letter number (LTR ###) - Your tax ID number - Specific tax year information - Clear explanation of what's owed and why - Multiple ways to respond (mail, phone, online) Most importantly, you can ALWAYS verify by calling the main IRS number or checking your online account at irs.gov. Never call numbers from a suspicious letter!

Thanks for sharing this - it's such a common issue right now! I've been helping my elderly neighbors with similar scam letters lately. One thing I'd add is that legitimate IRS notices will also have a specific payment stub at the bottom if you actually owe money, and they'll give you multiple payment options including paying online through the official IRS website. The "time-sensitive" language is a huge red flag - the IRS gives you plenty of time to respond and won't threaten immediate action without proper documentation. Real IRS notices also explain your appeal rights very clearly. If you're still unsure after checking your online IRS account, you can also take the letter to any local IRS Taxpayer Assistance Center where they can verify it in person. But honestly, based on your description (vague details, wrong phone number, threatening language), this sounds like a classic scam. Don't feel bad about being cautious - these scammers are getting really good at making fake letters look official. Better to double-check than to ignore something legitimate or fall for something fake!

I've been dealing with partnership K-1s for about 5 years now, and those Box 20 Code \ entries used to really stress me out too! What I've learned is that these codes are essentially the partnership's way of providing you with additional information that doesn't fit neatly into the standard boxes. For your specific situation with energy partnerships, those Code \ entries are very common. Energy partnerships often have complex depreciation schedules, depletion allowances, and other industry-specific items that need to be communicated to partners. The key thing to remember is that most of this information is for your records and future reference rather than immediate reporting. Here's what I do each year: I create a simple folder (digital or physical) for each partnership and save all the K-1 information, including those Box 20 notes. When tax time comes around, I enter the main K-1 data into my tax software, but I also make sure to save those Box 20 details separately. This has been incredibly helpful the few times I've had questions from the IRS or when I was considering selling one of my partnership interests. The most important advice I can give is don't overthink it for your current year return. Focus on getting the main K-1 items reported correctly, and treat those Box 20 codes as important documentation to keep with your tax records.

I've been working with partnership K-1s for several years as a tax professional, and I want to add some clarity about those Box 20 Code \ entries that several people have mentioned here. The backslash code is indeed a catch-all for miscellaneous information, but it's important to understand that while these entries are often informational for your current year return, they can have significant implications for your tax situation. The Section 751 assets and unrecaptured Section 1250 gain information mentioned earlier are perfect examples - they're not just "nice to know" details, they're legally required disclosures that partnerships must provide. For current year reporting, you're generally correct that these don't require separate line entries on your Form 1040. However, I always recommend reviewing each Box 20 entry carefully because some partnerships do include items that need current year reporting - things like interest expense limitations under Section 163(j) or bonus depreciation adjustments. One thing I haven't seen mentioned here is that if you're subject to the Net Investment Income Tax (NIIT), some of these Box 20 entries might affect that calculation. Energy partnerships in particular often have items that can impact your NIIT liability. My advice: keep detailed records of all Box 20 information, but don't stress about finding a specific place to report most of it on your current return. Focus on accuracy with the main K-1 items, and treat the Box 20 codes as important supplemental information for your tax records.

For the official IRS guidance you're looking for, check out Publication 925 (Passive Activity and At-Risk Rules) - specifically pages 6-7 which cover the disposition of passive activities. This explains exactly how your $125K in carried forward passive losses become fully deductible when you sell the rental property. Also look at Publication 544 (Sales and Other Dispositions of Assets) which covers the depreciation recapture rules. The key point is that Internal Revenue Code Section 469(g) allows all suspended passive losses to be deducted in the year you completely dispose of your interest in the passive activity. You're right that they're separate calculations - you'll pay up to 25% on the $132K depreciation recapture, but you'll also get to deduct the full $125K in passive losses against your other income. So while you have about $7K in "economic profit," your tax situation will be quite different due to how these items are treated separately on your return. Make sure your tax preparer understands this - I've seen many get confused about how the passive loss suspension rules work upon full disposition of a rental property.

I went through this exact scenario two years ago and can confirm what others have shared here. The key thing to understand is that when you sell your rental property, you're "fully disposing" of that passive activity, which triggers IRC Section 469(g) - this allows ALL your suspended passive losses from that property to become deductible against any type of income in the year of sale. Here's what actually happened in my case with similar numbers: - Had $140K in depreciation recapture (taxed at 25% = $35K in taxes) - Had $130K in accumulated passive losses that became fully deductible - The $130K deduction saved me about $45K in taxes at my marginal rate - Net result: despite the depreciation recapture, I actually got a significant tax benefit overall The forms you'll need are Form 4797 for the property sale and depreciation recapture, and Form 8582 to show the disposition of the passive activity and release of suspended losses. Make sure your tax preparer understands the Section 469(g) rules - mine initially missed this and almost cost me thousands. One last tip: if you've been doing your own taxes with software, this is probably the year to use a professional who specializes in real estate transactions. The interaction between these rules can be complex and the stakes are high with the dollar amounts involved.

One thing to consider - contributions made in installments over the year. I had a client who made 4 separate contributions to a foreign partnership, each around $30k, totaling $120k for the year. Does anyone know if these are aggregated for the $100k threshold? The regulations aren't super clear on timing.

Your interpretation is absolutely correct. Since your client contributed $475,000 to the foreign partnership, they definitely meet the Category 3 filing requirements under IRC Section 6038B(b)(1). The $100,000 threshold is clear - any US person who contributes property with a fair market value exceeding $100,000 to a foreign partnership must file Form 8865, regardless of their ownership percentage. The 10% ownership test and the $100,000 contribution test are alternative triggers, not cumulative requirements. Meeting either one requires filing. In this case, even though your client only has a 2.25% interest, the substantial contribution amount makes filing mandatory. Make sure to complete Schedule O (Transfer of Property to a Foreign Partnership) along with the main form. You'll need detailed information about the property transferred, its fair market value at the time of contribution, and any gain recognized on the transfer. Given the high-net-worth nature of your client, I'd also recommend documenting your analysis thoroughly in case of future IRS inquiries.

Just wanted to jump in with something no one's mentioned - make sure you're tracking everything in the RIGHT tax year!! I made the mistake of filing startup expenses from December 2023 on my 2024 return and got a letter from the IRS. You have to claim expenses in the tax year you actually paid them, even if your business hasn't launched yet. You can go back and amend prior year returns if needed.

Great question! I went through this exact same situation when I was starting my freelance graphic design business. You absolutely CAN file a Schedule C even without income yet, but there are some important things to keep in mind. The key distinction is between "startup costs" and "business expenses." True startup costs (before your business is actually operational) can only be deducted once your business begins - up to $5,000 in the first year, with the remainder amortized over 15 years. However, if you're already actively conducting business activities (even without revenue), those can be current year deductions. Since you mentioned spending on equipment, software, and courses, document WHY each expense was necessary for your business and WHEN you plan to launch. The IRS looks for genuine intent to make a profit, not just tax benefits. Keep a business journal showing your planning activities, market research, and steps toward launch. One tip: consider whether waiting until you actually start generating income might be simpler for your first year. You could still claim those startup costs retroactively once you begin operations. But if you're confident in your business plan and timeline, filing now is totally legitimate - just be prepared to show you're serious about this as a business, not a hobby.