Tbh the IRS doesn't have the resources to audit everyone who got audited b4. They look for specific red flags like unusually high deductions, mismatched income reporting, or math errors. Def make sure ur 1099s match what you're reporting! Also, if ur in the same income bracket as last yr, the DIF score (what the IRS uses to flag returns) might be similar, so double-check everything that got flagged last time.

I understand your anxiety about this! As an independent contractor myself, I went through a similar situation. Here's what I learned from my tax attorney: The good news is that having a prior audit doesn't automatically flag you for another one. The IRS uses statistical models (DIF scores) that primarily look at your current year's return, not your audit history. However, you're right to be extra cautious. Here's what helped me avoid issues after my audit: • Switched to a CPA who specializes in contractor taxes • Keep meticulous records - I now photograph every receipt immediately • Match ALL 1099s exactly (even if they're wrong, report them as received and make adjustments properly) • Be conservative with deductions - only claim what you can fully document The fact that you had to amend suggests there were legitimate errors to fix. As long as your new preparer addresses whatever caused the original audit, you should be fine. Don't let fear prevent you from filing on time - that creates bigger problems! Consider getting a second opinion on your return before filing if you're still worried. Peace of mind is worth the extra cost.

11 Has anyone here used owner financing as a buyer rather than a seller? I'm considering purchasing a property this way and wondering about tax implications from the buyer's perspective.

One thing to keep in mind with owner financing is the imputed interest rules. If you're not charging adequate interest on the financed portion (currently around 5.5% for long-term AFR), the IRS may impute interest income to you and treat part of your principal payments as interest income taxable at ordinary rates rather than capital gains rates. Also, make sure your purchase agreement clearly states the allocation of the purchase price if there are any personal property items included (like appliances or furniture). The stepped-up basis only applies to the real property portion, so you want to make sure everything is properly documented for tax purposes. Given the complexity of installment sales with inherited property, I'd strongly recommend getting everything reviewed by a tax professional before finalizing the sale agreement. The tax implications can be significant if not structured properly.

I'd suggest also considering the 95-day rule with capital improvements in a 1031 exchange. If you're buying a replacement property, improvements made within 95 days after closing can be considered part of the exchange value. Might not apply to your situation since you're asking about the relinquished property, but worth noting for the complete picture.

Based on my experience with several 1031 exchanges, the consensus here is correct about splitting your $37,000 in expenses. The $26,000 in capital improvements (roof and HVAC) should increase your adjusted basis on Form 8824 line O since they were substantial improvements that add long-term value to the property. The $11,000 in repairs and maintenance should go on line N as exchange expenses since they were incurred after the property ceased being a rental but were necessary to prepare it for sale. One additional consideration: make sure you have detailed receipts and documentation for all these expenses. The IRS scrutinizes 1031 exchanges more closely, and clear documentation of what constitutes capital improvements versus repairs will be crucial if you're ever audited. Also, since you mentioned the property stopped being a rental 2 months ago, confirm with your tax preparer how this timing affects any final depreciation calculations on the property before the exchange.

As a newcomer to this community but someone who's been wrestling with similar tax questions, this entire discussion has been incredibly enlightening! I've been running a small graphic design business from my home office for about 18 months and had no idea that self-rental arrangements were even possible, let alone potentially beneficial. What really strikes me from reading everyone's experiences is how this strategy requires a complete shift in thinking - from viewing your home office as just a space you happen to work in, to treating it as a legitimate rental property with proper business documentation and market-rate pricing. The emphasis on documentation, consistency, and professional guidance makes it clear this isn't something to approach casually. I'm particularly intrigued by the passive loss utilization angle that several commenters mentioned. I have some suspended losses from a small rental property that haven't been helpful to my tax situation, so understanding how the non-passive classification of self-rental income might unlock those benefits is really valuable information I hadn't considered. The warnings about IRS scrutiny and the importance of establishing legitimate business purposes beyond just tax savings are well taken. It sounds like success with this strategy depends on treating it as a long-term business arrangement rather than a year-to-year tax optimization tactic. My takeaway is that this requires significant upfront planning and ongoing compliance, but the potential benefits - both SE tax savings and broader tax planning opportunities - could be substantial if implemented correctly. Thanks to everyone for sharing such detailed real-world insights!

This has been such a comprehensive and helpful discussion! As someone new to this community and currently exploring tax strategies for my consulting business, I'm impressed by the depth of real-world experience everyone has shared about self-rental arrangements. What really stands out to me is how this strategy requires a fundamental shift from viewing your home office as just a workspace to treating it as a legitimate rental property with all the proper business documentation, market-rate analysis, and ongoing compliance that entails. The emphasis on documentation, consistency, and professional guidance makes it clear this isn't a DIY tax hack but a serious business arrangement. I'm particularly interested in the multi-layered benefits that several people mentioned - not just SE tax savings, but also passive loss utilization opportunities and broader tax planning considerations. The point about needing to model this over multiple years rather than just looking at immediate savings is something I hadn't fully appreciated. The warnings about IRS scrutiny and the importance of establishing legitimate business purposes beyond tax benefits are well taken. It sounds like success depends on treating this as a long-term business strategy with proper advance planning, not something you implement reactively at year-end. My key takeaway is that while the potential benefits are significant, this requires substantial upfront investment in professional guidance and ongoing compliance. The documentation requirements seem extensive but completely logical when you consider this needs to withstand IRS scrutiny as a genuine business arrangement. Thanks to everyone for sharing such detailed insights - this has been one of the most valuable tax discussions I've encountered!

This is exactly the kind of confusion I see all the time in family businesses! Your accountant is definitely wrong here. As a zero-ownership employee, you should be treated exactly like any other W-2 employee for health insurance purposes. The 2% shareholder rules that restrict S-Corp health insurance deductions only apply to actual shareholders (and their spouses/dependents), not to family members who simply work for the company without owning stock. Since you explicitly have no ownership stake, your health insurance premiums should remain fully deductible as a business expense - just like they were when you were a C-Corp. I'd recommend getting a second opinion from a CPA who specializes in S-Corp taxation. Many accountants get tripped up by family business scenarios and incorrectly assume that ANY family relationship triggers the shareholder restrictions, but that's not how the tax code works. The key is actual ownership percentage, not family ties. Your dad (as the owner) will need to follow the special S-Corp rules for his own health insurance, but yours should be straightforward employee benefits with no special treatment required.

You're absolutely right to question your accountant's advice! This is a surprisingly common mistake I see with S-Corp taxation. Since you have zero ownership stake and work as a regular W-2 employee, your health insurance premiums should be fully deductible by the S-Corp as a business expense - exactly the same treatment you had as a C-Corp employee. The confusion likely stems from the special rules that apply to shareholders who own more than 2% of S-Corp stock. For those individuals (like your dad), health insurance premiums must be included in their W-2 wages (though not subject to FICA) and then deducted on their personal tax return. But this restriction only applies to actual shareholders and their spouses/dependents - not to family members who simply work for the company without any ownership interest. Your family relationship to the owner doesn't change your tax treatment as long as you don't actually own stock. I'd recommend asking your accountant to cite the specific IRS code section they're relying on, because I suspect they're incorrectly applying the 2% shareholder rules to all family members regardless of ownership status. You might want to get a second opinion from a CPA who specializes in S-Corp taxation, especially since this could affect other employee benefits beyond just health insurance. The distinction between being a "family member employee" versus a "shareholder" is crucial and often misunderstood.