This thread has become an amazing resource! I'm currently in week 6 since my 977 code appeared, and reading everyone's experiences here has really helped manage my expectations about the timeline. One thing I wanted to add from my research: if you're checking your transcript and see a cycle code ending in "05" (like 20240505), that typically means your return is being processed in the current cycle. If it ends in "02" or "03", it might indicate additional review time needed. Also, I've found that calling the IRS early in the morning (right when they open at 7 AM) gives you the best chance of getting through without ridiculous hold times. The agents have been pretty helpful in confirming that my return is moving through normal processing channels. For those just starting this journey - the waiting is brutal, but everyone's timeline estimates here have been pretty accurate in my experience. The 971 notice really is just bureaucratic confirmation, nothing to stress about. Hang in there! 💪

Your situation is actually more common than you might think! The good news is that seeing the 971 and 977 codes appear means your amended return is now officially in their processing queue, even though the timing feels stressful. From what you've described, it sounds like the IRS was already planning to make the same adjustments that you included in your amended return. This is actually ideal - when your amendment matches what they were going to change anyway, it typically speeds up processing rather than delays it. The system essentially confirms "yes, the taxpayer caught the same issue we found" and moves forward. A few things to keep in mind: - Your "as of" date updating from 3/24 to 11/24 and now 12/1 is a very good sign that active work is happening - The 971 code with today's date means they're generating a notice, likely confirming receipt of your amendment - Since you agreed to their proposed changes AND filed an amendment that matches, you're probably looking at the faster end of processing times I'd expect to see movement within 8-12 weeks from your 10/31 amendment date, so potentially late January to mid-February. The fact that both the IRS adjustment and your amendment align should actually streamline things rather than complicate them. Keep monitoring that "as of" date - as long as it keeps moving forward every few weeks, you're on track. You did the right thing by amending to match their proposed changes!

This is such a helpful thread! I'm in a similar situation - did some freelance graphic design work last year (about $2,800) alongside my regular job and TurboTax is also prompting me for Form 8995. Reading through all these responses, it sounds like I should definitely take advantage of the QBI deduction rather than skip it. Paolo's point about doing Schedule C first is super important - I need to make sure I'm deducting my home office expenses, software subscriptions, and equipment costs before calculating that 20%. One question though - does anyone know if there's a minimum income threshold for the QBI deduction? I want to make sure it's worth the extra complexity for my relatively small freelance income.

This thread has been incredibly helpful! I was in the exact same boat last month - doing gig work for the first time and completely confused about Form 8995. One thing I learned that might help others: if you're using TurboTax and it's asking for the Self-Employed upgrade just because of Form 8995, you might not actually need it. I was able to manually enter my Schedule C information and Form 8995 using the basic version after doing some research on what each line meant. The key is understanding that Form 8995 is actually TWO potential benefits: the QBI deduction (up to 20% of net profit) AND it qualifies you for the self-employment tax deduction (half of your SE tax). Even though you pay the 15.3% SE tax that others mentioned, you get to deduct half of that amount, which softens the blow. For anyone still stressed about this - take a breath! The form looks scary but it's mostly just transferring numbers from your Schedule C. TurboTax will calculate everything once you enter your business income and expenses correctly.

I'm an insurance agent with a side gig selling handmade crafts. Last year was my first year with substantial business losses ($8k), and I was in a very similar situation. My regular job withheld about $3200, but I got back almost $7000! What nobody's mentioned yet is the Earned Income Credit - with three kids and a reduced income (after your business losses), you might qualify for a significant EIC, which is refundable. Combined with the Child Tax Credit, this can definitely result in getting back more than you paid in. And that workshop building? That's a capital asset that could be eligible for Section 179 deduction or bonus depreciation, allowing you to deduct the full cost in year one rather than depreciating it over several years. I say go with the tax software calculation. Just make sure you have documentation for all your expenses in case you do get questioned.

I'm going through something very similar as a newcomer to small business taxes! I started a consulting business last year and had significant startup costs that put me in the red, but I also have a W-2 job and two kids. What really helped me understand this was learning that business losses on Schedule C directly reduce your Adjusted Gross Income (AGI), which can make you eligible for refundable credits you might not have qualified for otherwise. The Child Tax Credit alone can be up to $2,000 per child, and it's refundable up to $1,600 per child even if you owe no taxes. Your accountant saying "the government won't pay you to run a failing business" misses the point - these aren't payments for failing, they're legitimate tax credits for families with children that you become eligible for when your business losses lower your income. One thing that gave me confidence was double-checking my calculations manually using the IRS worksheets for the Child Tax Credit and EIC. The tax software is usually right, but doing it by hand helped me understand exactly where that extra refund was coming from. You might want to try that too - it's actually not that complicated once you work through it step by step.

17 Has anyone calculated if it might just be better to pay the capital gains now instead of going through all this hassle? Long-term capital gains rates are historically pretty low (15% for most people), and property management is becoming such a headache with rising insurance costs and maintenance.

Don't forget to consider state tax implications too! While you're focused on federal capital gains deferral through the 1033 exchange, some states don't recognize the federal deferral and will tax you immediately on the gain. I found this out the hard way when California hit me with state capital gains taxes even though I properly deferred the federal taxes through my involuntary conversion. Make sure to check with a tax professional familiar with your state's rules - it could significantly impact whether the 1033 exchange makes financial sense in your situation.

You guys are overlooking something important - when you pass away, your heirs get a stepped-up basis to fair market value, and all that deferred depreciation recapture disappears! If you're planning to keep properties for your lifetime, this is the ultimate tax strategy. My parents did this with several rental properties and avoided hundreds of thousands in recapture and capital gains taxes.

The stepped-up basis strategy mentioned by @Jade Lopez is fascinating, but there's an important caveat most people miss: while it's true that inherited properties get stepped-up basis, you need to consider the estate tax implications if your total estate exceeds the federal exemption ($12.92 million in 2023). For most rental property investors, this isn't an issue, but if you're accumulating significant real estate wealth, you might face estate taxes that could offset some of the stepped-up basis benefits. Also, some states have lower estate tax thresholds. That said, for typical investors with a few rental properties, the "buy and hold until death" strategy is incredibly powerful. I've seen families build generational wealth this way - the kids inherit properties worth millions with zero tax basis, then can either hold them for continued cash flow or sell immediately with minimal taxes. One more tip: if you're considering this long-term strategy, make sure your properties are titled correctly and consider setting up LLCs or trusts to protect the assets and streamline the inheritance process.