This is a great point about framing the negotiation properly. I'd add that your friend should also consider the timing element here - if the business continues operating with losses, that sweat equity partner will keep receiving negative K-1s that could complicate their personal tax situation. Another angle to consider: since this partner never contributed cash, they likely don't have sufficient "basis" to deduct all the losses that have been allocated to them anyway. This means they may have suspended losses on their personal return that they can't currently use. A clean exit might actually be more valuable to them than continuing to accumulate unusable tax losses. Your friend might want to get a tax professional to calculate what the partner's actual tax basis is versus their capital account balance. These are often very different numbers, and the basis calculation might show that the partner's economic position isn't as strong as the capital account balance suggests. The key is documenting everything properly so the buyout is structured in a way that's defensible to the IRS and fair to all parties involved.

I've dealt with this exact situation multiple times, and the suspended loss angle is absolutely critical leverage that most people miss. In one case, we had a sweat equity partner with a $85k negative capital account who was demanding full payment. When we calculated their actual tax basis (which was essentially zero since they never contributed cash), we discovered they had over $70k in suspended losses sitting on their personal return that they couldn't use. We presented this analysis showing that continued partnership ownership would likely generate more unusable losses, while a buyout - even at a significantly reduced amount - would allow them to trigger some of those suspended losses as a capital loss on the sale of their partnership interest. The partner ended up accepting a $15k settlement because they realized the alternative was continuing to receive K-1s with losses they couldn't deduct, plus the complexity of tracking suspended losses for potentially years. The key is getting a tax professional to run the numbers on both the capital account AND the tax basis/suspended loss calculation. Often the partner's actual economic position is much weaker than the capital account suggests, especially when they never contributed actual capital but have been allocated years of losses. This analysis completely changes the negotiation dynamic and often leads to much more reasonable settlement amounts.

Just want to point out that for 2024, the threshold for payment apps to send 1099-Ks is $5,000, not the $600 threshold they were initially planning. So depending on how much you paid your babysitter, they might not even get a 1099-K from Venmo at all. Also, make sure your payroll service marked these payments as household employee wages, not independent contractor payments. That classification makes a big difference in how everything is handled tax-wise.

Does anyone know if this impacts household employees who didn't receive a W-2? I paid my house cleaner through Venmo all year (about $6,000 total) but didn't use a payroll service. Now I'm worried they'll get a 1099-K and have to pay self-employment taxes when they're technically a household employee.

Question for anyone who's dealt with this - does how you categorize these fees change if you're passing some of the costs to customers? We charge a small "financing fee" for customers who choose Affirm or Klarna.

For a business your size ($340K revenue), these Affirm processing fees are definitely fully deductible as ordinary business expenses under Section 162 of the tax code. I've been handling similar situations for small e-commerce businesses for years. The key thing to remember is that these fees should be deducted in the tax year when the transaction occurs, not when you receive the funds from Affirm (which can sometimes take a few days). This is called the "accrual method" and applies even if you're normally a cash-basis taxpayer. I'd suggest setting up a separate line item in your books specifically for "Affirm Processing Fees" - this helps with tracking your actual costs per payment method and makes tax preparation much cleaner. Your CPA will appreciate the organization when they return from vacation! One more tip: if you're offering any promotional financing through Affirm (like 0% interest periods where you pay extra fees), those should technically be categorized as marketing/promotional expenses rather than processing fees, though both are fully deductible.

I'm dealing with something similar right now! My Credit Karma Money app has been stuck on that same "Yikes! We're having trouble loading your data" error for 3 days. It's so frustrating because I can see all the menu options but can't access any actual account information. Based on what others are saying here, it sounds like this might be their fraud protection system kicking in when they're processing large deposits like tax refunds. I'm going to try logging in through their website on my computer like a few people suggested - seems like the app might just be buggy while the actual account is fine. Has anyone had luck with that dedicated tax support line (1-888-475-3126) that was mentioned? Regular customer service has been completely useless for me so far.

I'm going through the exact same thing right now! The "Yikes! We're having trouble loading your data" error has been haunting me for 4 days straight. It's so nerve-wracking when you're expecting a substantial refund and can't even see if it's there. Reading through all these responses is actually really reassuring - sounds like this is a common issue during tax season when they're processing large deposits. I'm definitely going to try accessing my account through their website instead of the app, and if that doesn't work, I'll call that dedicated tax support line at 1-888-475-3126. It's frustrating that their regular customer service doesn't seem to know anything about this issue, but at least now I understand it's likely their fraud protection system doing its job rather than my refund being lost somewhere. Thanks everyone for sharing your experiences - makes me feel a lot less anxious about the whole situation!

Has anyone ever had success getting the IRS to move quicker on resolving an amended return situation? My accountant said amended returns are taking 6-8 months to process right now, but meanwhile I'm getting threatening CP504 notices like the original poster. It's so frustrating!

I totally understand your stress - CP504 notices are designed to get your attention and they definitely do that! Your accountant's reaction actually makes sense to me. When you've been trying to resolve an issue through normal channels for months without success, sometimes escalation (like a CP504) can actually work in your favor by giving you access to different departments or priority handling. The fact that your accountant strongly advised against paying is significant. If you pay the disputed amount, you're essentially validating the IRS's incorrect assessment, and getting refunds back from the IRS is notoriously slow and difficult. It's much better to resolve the underlying error first. That said, I'd recommend asking your accountant for a detailed timeline of what's been submitted and when you can expect resolution. Also ask if he's requested any formal collection holds. Even though he seems confident, having a clear picture of the process will help reduce your anxiety. You could also consider calling the IRS yourself (or using a service to help you get through) just to verify what's on file and confirm the status - not to contradict your accountant, but just for your own peace of mind.