Has anyone successfully had the IRS accept retroactive loan documentation? My accountant says its too late for me since my business has already made several "repayments" over the last 2 years without proper documentation. Now she wants me to pay capital gains on all of it!

I went through this exact same nightmare last year! My LLC (S-Corp election) had been "repaying" my initial capital injection for two years before I realized I never created proper loan documentation. My CPA initially wanted to treat everything as taxable distributions. Here's what saved me: I worked with a tax attorney to create a formal loan agreement that matched what had actually been happening (reasonable 4% interest rate, quarterly payments). We filed Form 8275 with my amended return explaining the documentation was being formalized to properly reflect the original intent of the transactions. The IRS accepted it without issue. The key was showing that the loan terms were reasonable and consistent with actual business practice. I had to pay tax on the interest portion going forward, but the principal repayments were correctly treated as non-taxable return of my loan. Don't let your CPA take the easy way out by just calling everything capital gains. If you genuinely loaned money to your business with the intent to be repaid, you can usually fix the documentation issue. Just make sure any loan terms you create are commercially reasonable and match what you've actually been doing.

I just wanna point out that you should really think twice before claiming ANY GoFundMe donations as tax deductions unless you're 1000% sure they qualify. My cousin tried to deduct some last year and got audited! The IRS flagged it immediately and he had to pay back the deduction plus a penalty. Unless you have proper documentation from a registered charity (tax ID number, proper acknowledgment letter, etc), don't risk it. Most personal GoFundMe campaigns are considered gifts to individuals, not charitable donations, no matter how worthy the cause.

This is such a helpful thread! I had no idea about the distinction between personal campaigns and actual nonprofit fundraisers on GoFundMe. I've been donating to various campaigns throughout the year and just assumed none of them would be deductible. One thing I'm still unclear on - if a GoFundMe campaign is created BY the nonprofit organization themselves (not an individual fundraising for them), does that automatically make it deductible? Or do I still need to look for specific documentation or tax receipts? Also, for the original poster's animal rescue donation - even if it wasn't through GoFundMe Charity, couldn't you contact the rescue directly to ask if they're a registered 501(c)(3) and request a proper donation acknowledgment letter after the fact? It seems like that might be worth a shot for the $450 in donations, especially if one of them was to an actual charity.

Ugh, I feel your pain! Had a similar situation last year where they claimed no record of my return even though I had confirmation it was processed. Turns out there was some weird glitch in their system where amended returns weren't properly linking to the original filing. Had to send in copies of EVERYTHING again - original return, amendment, all supporting docs. Took like 3 more months to sort out but they eventually found it. Definitely respond to that notice within 30 days though or it gets way worse. Maybe try calling the practitioner priority line if you can get someone to help - regular customer service is useless for this stuff.

This happened to me too! CP3500 notices are SO confusing especially when you know you filed. From what I've learned, sometimes the IRS sends these when there's a mismatch between your original return and amended return data in their system. Even though your amendment was "accepted" online, it might not have fully processed or linked correctly to your original filing. The good news is this doesn't mean you have to start completely over - you just need to provide documentation proving you filed. I'd gather copies of your original 2022 return (with filing confirmation), your 1040X amendment, and any supporting docs you changed. Send certified mail with return receipt so you have proof they received it. Also definitely call them at that number on the notice rather than the general line - you'll get someone who can actually look at your specific case. The wait times still suck but at least they'll have your file pulled up already. Hope this helps! 🤞

Has anyone used appeals after getting a Notice of Deficiency? I know typically you'd go through appeals before getting a NOD, but in my case, the revenue agent went straight to issuing the notice without giving us a chance at appeals.

I've been through a similar situation and wanted to share what worked for us. We received a Notice of Deficiency for $31,000 in disallowed business expenses, and honestly, the 90-day deadline felt overwhelming at first. Here's what I learned: Don't wait to file the Tax Court petition if you believe the IRS is wrong. Filing the petition doesn't mean you're committing to a full trial - it preserves your rights and stops the assessment clock. Many cases get resolved through settlement conferences with IRS Appeals once you're in the Tax Court system. The key is having your documentation organized and a clear argument for why each expense should be allowed. We ended up settling for about 20% of the original assessment without ever going to trial. The IRS Appeals officer was much more reasonable to work with than the original examining agent. Also, consider getting professional help if the amount is significant. The cost of a tax attorney or CPA experienced with Tax Court cases is often worth it when you're dealing with a $24,000+ assessment. They know exactly how to present your case and what Appeals officers are looking for in settlement discussions. Time is your enemy here - use it wisely to build the strongest case possible rather than hoping for a miracle solution that avoids Tax Court entirely.

One important thing nobody mentioned - you need to track your expenses CAREFULLY! I made this mistake my first year of selling handmade stuff. Just because PayPal only reports income over $600 doesn't mean you can't deduct your legitimate business expenses. Save receipts for EVERYTHING related to your digital design work. Software, hardware, portion of internet bill, even a percentage of your electricity if you work from home. These deductions can often bring you below the $400 threshold where you'd need to pay self-employment tax. I learned this the hard way!

Another thing to consider is quarterly estimated tax payments. If you expect to owe more than $1,000 in taxes for the year, you're supposed to make quarterly payments instead of paying it all when you file your return.