Could also be interest they paid you on your escrow account! My lender sent me a 1099 for $27.38 which was apparently the interest earned on my escrow funds. Totally forgot that was a thing, but if you live in a state that requires lenders to pay interest on escrow accounts, that might be it.

I went through this exact same confusion last year! In my case, the 1099-MISC was for a lender credit I received at closing that reduced my closing costs by $800. I had completely forgotten about it until I dug through all my closing paperwork. The tricky part is that these lender incentives (whether they're cashback, closing cost credits, or promotional bonuses) are considered taxable income by the IRS, even though they feel like discounts to us as borrowers. Your 1098 form for mortgage interest is completely separate and unaffected by this. If you still can't figure out what the 1099-MISC amount corresponds to, I'd recommend checking your Closing Disclosure (CD) form from your purchase. Look for any credits, rebates, or incentives listed there. The amount on your 1099-MISC should match one of those items. Sometimes they break down larger credits into smaller components too, so don't be surprised if the math isn't immediately obvious. When you file your taxes, you'll report this as "Other Income" and yes, you'll owe taxes on it at your regular income tax rate. It's annoying to discover after the fact, but at least now you know for any future home purchases!

Great thread! I'm seeing a lot of helpful advice here. Just wanted to add that timing is absolutely critical for the Form 2553 election. Even after you get the state-level corporation established, remember that the S-Corp election must be filed by the 15th day of the 3rd month of the tax year you want it to take effect (March 15th for calendar year taxpayers). If you miss this deadline, you'll have to wait until the following tax year OR request late election relief under Revenue Procedure 2013-30, which requires showing reasonable cause for the delay. The IRS is pretty strict about this timing requirement. Also, make sure all shareholders (including the converted LLP partners who become shareholders) sign the Form 2553. Missing signatures are another common reason for rejection that I've seen in practice.

This is such a comprehensive discussion! As someone who's dealt with several entity conversions, I want to emphasize the importance of getting professional guidance early in the process. The two-step conversion process (state corporation formation first, then IRS S-Corp election) is absolutely critical, but there are so many nuances that can trip you up. Beyond the technical filing requirements, you really need to consider the broader business implications that Micah mentioned - liability structure changes, corporate formalities, shareholder restrictions, and exit planning implications. One thing I'd add is to make sure you're documenting everything properly throughout the conversion process. Keep detailed records of the state filing dates, corporate resolutions, and any correspondence with state agencies. This documentation becomes crucial if the IRS has questions about the conversion timeline or if you need to demonstrate reasonable cause for any timing issues. Also, don't underestimate the ongoing compliance burden that comes with S-Corp status. While the self-employment tax savings can be substantial, S-Corps require reasonable salary determinations for shareholder-employees, payroll tax compliance, and more rigorous bookkeeping. Make sure your client understands and is prepared for these ongoing requirements before making the switch.

Just wanted to add one more important point that I learned the hard way - make sure to keep detailed records of WHY your spouse qualified as a DEB at the time of inheritance. I'm dealing with this exact situation now where my husband has been on SSDI for years and inherited his father's IRA last year. The financial institution initially set up the account correctly as a DEB inherited IRA, but during a recent review, they questioned whether his SSDI status was sufficient documentation. Even though SSDI recipients generally qualify under IRC Section 72(m)(7), having a complete paper trail made all the difference. I recommend keeping copies of: the original SSDI award letter, recent benefit statements showing payments were active at the time of inheritance, and any medical documentation that was used in the SSDI determination process. This documentation package will save you headaches if the IRS or financial institution ever questions the DEB status. Also, regarding the Roth conversion question - we decided against it in our case because the RMD would push us into a higher tax bracket. Make sure to run the numbers on the tax impact before making that decision!

Great question about partial conversions! Yes, you can absolutely do partial Roth conversions over multiple years to manage the tax impact. In our case, we calculated that converting the full RMD would have pushed us from the 22% bracket into 24%, so instead we're doing smaller conversions each year to stay within our current bracket. For the documentation timing - it's much better to provide the DEB documentation upfront when establishing the inherited IRA. Most financial institutions will ask for it during the account setup process if you indicate the beneficiary qualifies as a DEB. However, if you didn't provide it initially, you can submit it later, but you'll want to do this before taking any distributions to ensure you're following the correct RMD schedule (life expectancy vs. 10-year rule). The key documents to have ready are: the SSDI award letter showing the disability determination date, benefit verification letters showing active payments at the time of inheritance, and Form SSA-1099 showing the benefits received. Having these ready upfront prevents any delays or complications with the account setup. One strategy we're using is taking the required RMD early in the year, then doing a separate Roth conversion later in the year when we have a better sense of our total tax picture. This gives us more control over the timing and tax impact.

Has anyone tried the self-study approach without buying a course? I'm on a really tight budget but determined to get this done.

I'm in a similar situation as you - just starting my EA journey and feeling overwhelmed by all the study options out there! Reading through these responses has been really helpful. One thing I'm noticing is that everyone emphasizes the importance of practice questions, which makes sense since the exam tests application of knowledge rather than just memorization. I'm leaning toward starting with the free IRS materials and publications that Dylan mentioned to build my foundation, then investing in a comprehensive course once I understand the scope better. Has anyone found certain parts of the exam significantly harder than others? I'm trying to decide if I should tackle them in order (Parts 1, 2, 3) or start with whichever might be easiest to build confidence. Also curious about timing - how far apart did people space their exam attempts? Thanks for all the detailed advice so far - this community is incredibly helpful for newcomers like us!

Just to add something useful - we handled our daughter's horse competition sponsorships by creating a simple DBA ("doing business as") registration for her, with us as guardians. Cost about $35 to register with the county. This created a legitimate business entity that could receive the sponsorship funds, issue proper receipts to sponsors, and track expenses appropriately. Her sponsors got proper documentation for their tax deductions, and we maintained her amateur status by documenting that all funds went directly to competition expenses. We keep a separate bank account for all this to make the accounting clean.

Great question about the EIN! We actually got an EIN for my daughter's DBA even though she's a minor - it makes everything cleaner from a banking and tax perspective. You can apply for an EIN online at irs.gov and it's free (don't pay third-party services that charge for this). Having the EIN allows you to open a business bank account separate from personal accounts, which is crucial for maintaining clean records. It also makes it easier when sponsors need to issue 1099s at year-end if the payments exceed $600. For your son's situation with equipment from your uncle's sporting goods store, you'll want to be careful about how you value and document those transactions. If it's truly sponsorship (logo placement, social media mentions, etc.), then the fair market value of the equipment would be considered income to your son's business, and your uncle could deduct it as a business expense. Make sure to document the retail value of any equipment provided. The key is maintaining proper documentation regardless of whether it's cash sponsorship or equipment sponsorship - the IRS treats them the same way for tax purposes.