One additional consideration that might be helpful - make sure to review your S-corp election timing and any potential Section 1202 Qualified Small Business Stock (QSBS) benefits. If your LLC made the S-corp election early enough and you've held your interest for at least 5 years, you might qualify for the QSBS exclusion which could eliminate federal taxes on up to $10 million of the gain (or 10x your basis, whichever is greater). This would be even better than just avoiding the 3.8% NIIT - it could potentially eliminate the entire federal capital gains tax on your $875K gain. The QSBS rules are complex and have specific requirements around when the election was made, the type of business, and how the stock was acquired, but it's definitely worth having your accountant review this when they return. Also, since you mentioned multiple owners, each owner can potentially claim their own $10M QSBS exclusion, so the total benefit for your group could be substantial. This is one of those situations where the entity structure (LLC electing S-corp treatment) might actually work in your favor for tax planning purposes.

Looking at your situation, you're in a really strong position to avoid the 3.8% NIIT on your $875K gain. Since you've been actively involved in running the business since 2018, you almost certainly meet the material participation requirements that exempt you from NIIT. A few key points based on the great discussion above: **Material Participation** - With 6+ years of active involvement, you likely qualify under multiple tests (500+ hours annually, substantially all participation, or the 5-of-10 years test). The LLC/S-corp structure doesn't change this fundamental exemption. **Documentation Priority** - Start gathering evidence of your participation NOW: emails showing business decisions, calendar entries, meeting minutes, travel records, contracts you signed, etc. Even without perfect hour logs, multiple types of evidence showing consistent involvement will be convincing. **QSBS Potential** - This could be huge! If your LLC made the S-corp election early and you've held your interest since 2018, you might qualify for Section 1202 QSBS exclusion. This could eliminate federal taxes on your entire $875K gain (not just the 3.8% NIIT). Given the potential $131K+ in tax savings, consider having your accountant prioritize this analysis even if they're on vacation. **Next Steps** - Gather all formation documents, S-corp election paperwork, and ownership records. Document your business activities timeline. If QSBS doesn't apply, the material participation exemption alone should save you about $33K in NIIT. With the sale in 6 weeks, time is critical but you have multiple strong paths to significant tax savings. This is definitely worth expediting professional review!

I'm sorry you're going through this nightmare - tax liens from an ex-spouse can be one of the most frustrating post-divorce issues to deal with. You're definitely taking the right approach with the Form 14135 Certificate of Discharge. One thing I'd strongly recommend is also requesting a "lien subordination" if the discharge doesn't work out. This allows you to refinance or sell while keeping the lien in place, but it moves to a subordinate position behind your new mortgage. Sometimes the IRS is more willing to approve subordination than a full discharge, especially if it doesn't reduce their ability to collect. Also, make sure you're calculating interest and penalties correctly when you submit your discharge application. The IRS calculates these daily, so the amount keeps growing. If you can show that your ex's equity share at the time of divorce was sufficient to cover the original debt plus reasonable interest, that strengthens your case significantly. Have you considered having your divorce attorney write a letter to include with your application explaining the circumstances and how the divorce decree specifically assigned tax liability to your ex? Sometimes having that legal perspective documented helps the IRS understand that this isn't just a property dispute but a legitimate separation of marital debts. The whole process typically takes 2-3 months, but don't be surprised if they ask for additional documentation. Keep copies of everything and follow up regularly.

I'm dealing with a very similar situation and wanted to share something that might help speed up your process. When I submitted my Form 14135, I initially just included basic documentation, but the IRS came back requesting additional proof of property values and my ex's financial situation. What really made the difference was creating a comprehensive "equity analysis" spreadsheet that showed: - Fair market value of the home at divorce (with professional appraisal) - Outstanding mortgage balance at divorce - Total equity available at divorce - My ex's percentage share based on our settlement - His share's dollar value vs. the tax debt amount I also included a timeline showing when the lien was filed relative to our divorce proceedings and property transfer dates. The IRS approved my discharge in just 31 days after resubmitting with this detailed analysis. One other tip - if you haven't already, call the IRS Collection Division directly and ask them to put a "currently not collectible" status on the lien while your discharge application is pending. This stops additional penalties and interest from accruing during the review process. You'll need your ex's SSN and the lien reference number, but it can save you hundreds or even thousands in additional charges. The whole situation is absolutely maddening, but hang in there - you're taking all the right steps and it sounds like you have a strong case for discharge.

I'm going through something similar right now! Filed in March and have been stuck with the 570/971 codes since April. The waiting is absolutely brutal, especially when you're counting on that money. A few things that helped me while I'm still waiting: - Set up text alerts through the IRS2Go app so you get notified of any transcript changes - Keep calling early in the morning (7-8am) - I finally got through last week and they confirmed my letter was sent but to the wrong zip code - Document everything - dates you called, reference numbers, what they told you The rep I spoke with said these identity verification cases are taking 12-16 weeks on average right now. Hang in there - I know it's frustrating but you will eventually get your refund. The system is just completely overwhelmed. Have you tried creating an online account to see if there are any notices posted there? Sometimes they show up online before the physical letter arrives.

I went through this exact same situation last year! Had the 570/971 codes for almost 4 months before everything got resolved. The most important thing is to not panic - those codes are super common and usually just mean they need to verify something routine. A couple of suggestions based on my experience: - Check if your address is correct in your IRS online account. I found out they had my old apartment number which is why I never got their letter - Try calling the IRS right when they open at 7am - that's when I finally got through after weeks of busy signals - Keep checking your transcript weekly for any new codes or date changes The waiting is absolutely torture when you need that money, but in my case they eventually released the full refund plus interest for the delay. The 971 notice should arrive soon and will tell you exactly what they need from you. Once you respond to whatever they're asking for, it usually moves pretty quickly after that. Stay strong - you will get your refund! The IRS is just incredibly backed up right now but they do eventually work through everything.

Don't overlook your state tax agency too. Most states have their own tax fraud reporting systems, and sometimes they're more responsive than the IRS for smaller cases. Just google "[your state] report tax fraud" and you'll usually find a form or hotline.

Just want to add that timing can be important when filing these reports. If you know the person is currently preparing their taxes or just filed, that might be a good time to submit your report since the IRS will have fresh information to compare against. Also, keep records of when you submit your report - I've heard the IRS sometimes takes months or even years to follow up, so having documentation of when you first reported can be helpful if they ever contact you for additional information. One more thing - if this person is a business owner, the IRS might be more interested since business tax fraud often involves larger amounts than individual income tax issues. Good luck with whatever you decide to do!

This has been such a helpful thread! I'm in a similar boat - got a small IRS interest payment last year but completely forgot about it until I started doing my taxes this week. For anyone still looking for their interest amount, I found another way that worked for me: if you have the IRS2Go mobile app, you can access your account transcript right from there too. Sometimes it's easier than navigating the full website on desktop. Just go to "Get Transcript" and select "Account Transcript" for the tax year in question. The transaction code 776 tip from @Jade Lopez was spot on - mine showed up as $8.47 in interest. Even though it's a tiny amount, I'm glad I found this discussion before filing. Better safe than sorry when it comes to the IRS! One question though - does anyone know if there's a statute of limitations on reporting this kind of interest? Like if I missed reporting IRS interest from 2-3 years ago, should I file an amended return or is it too late/not worth worrying about for such small amounts?

This thread has been incredibly helpful! I'm actually dealing with this exact situation right now - received a small IRS interest payment of around $12 but couldn't find the paperwork anywhere. The transcript lookup method using transaction code 776 worked perfectly! For anyone else struggling with this, here's exactly what I did: logged into my IRS online account, went to "Get Transcript Online," selected "Account Transcript" for the correct tax year, then used Ctrl+F to search for "776" on the page. Found my interest payment immediately. I was also worried about such a small amount, but reading through all these responses made it clear that even tiny interest payments need to be reported. Better to be compliant than risk any issues later, especially when it's so easy to find the information once you know where to look. Thanks to everyone who contributed - this community really saved me a lot of time and stress!