Great question! I've been doing taxes for about 8 years now and still see this confusion all the time. Here's how I explain it to clients: "We're currently in the 2023 tax filing season" - this is usually what they want to know. We're filing returns for income earned in 2023, with a deadline of April 15, 2024. But I always follow up with: "Is there something specific you're trying to figure out?" Because sometimes they're asking about: - Whether they missed a deadline (2023 returns) - What year to put on forms they're filling out now (2024) - When their next tax return will be due (2024 taxes due April 2025) The key is not assuming what they mean by "tax year." I've found that about half the time, they're really asking "Am I late filing something?" rather than wanting a technical explanation of tax years vs. filing seasons. One phrase that works well: "Right now we're filing 2023 tax returns, but if you're earning money today, that goes on next year's return." Keeps it simple but covers both scenarios!

As someone who's been handling client calls for about 3 years, I've found that creating a simple "cheat sheet" for this exact question has been a lifesaver. I keep it right by my phone and it has saved me so much confusion. My go-to response is: "We're currently in the 2023 tax filing season, which means we're preparing returns for income you earned last year in 2023. Those returns are due April 15th, 2024. Any income you're earning right now in 2024 will go on next year's tax return." But honestly, the best advice I can give is what others have mentioned - always ask a follow-up question. I usually say "What specifically are you trying to figure out?" because 9 times out of 10, they're not actually asking for a technical explanation of tax years. They're usually wondering: - "Did I miss the deadline to file?" - "What year do I put on this form I'm filling out?" - "When is my next payment due?" Once you know what they're really asking, you can give them the exact information they need instead of a confusing lecture about tax terminology. It's made my job so much easier and clients seem way less frustrated after our calls!

Just to add another perspective - I've done S-corp returns for 5 years now and have always included Schedules L and M-1 regardless of size. Why? Because they tell the story of your business financially. Even though not required, they show what assets/debts the business holds and reconcile book/tax differences. This has been super helpful documentation when getting business loans later. Plus, if you ever have an audit, having these already completed saves headaches. If you're using decent tax software, it really isn't much extra work to complete them. Better to have too much documentation than too little in my experience.

Super practical advice for a one-person S-corp like yours: if you're using tax software like TaxAct Business or H&R Block Business, they'll walk you through these schedules pretty easily. The balance sheet info for Schedule L is basically just what you own and what you owe at beginning/end of year. M-1 reconciles book income vs tax income differences. Takes maybe 15 extra minutes but gives you better documentation. I keep a simple spreadsheet tracking my assets, liabilities and equity throughout the year which makes filling these out a breeze. Might be worth starting that practice even if you don't file the forms this year!

Has anyone used Rev. Proc. 96-10 for a partnership division? My understanding is it provides a safe harbor for certain types of partnership splits.

One thing that hasn't been mentioned yet is the importance of timing your division carefully. The IRS looks at the entire series of transactions, not just individual steps, when evaluating disguised sales under Section 707(a)(2)(B). Since you mentioned the real estate has significant appreciation, you'll want to be particularly careful about how debt allocations are handled. If any partner receives a reduction in their share of partnership debt as part of the division, that could be treated as a deemed cash distribution and trigger disguised sale treatment. Also, make sure to document the business purpose for the split thoroughly. The IRS is more likely to respect the transaction if you can show legitimate business reasons (like different investment strategies, geographic focus, or management philosophies) rather than just tax avoidance motives. Given the $875K value involved, I'd strongly recommend getting a second opinion from a tax professional who specializes in partnership taxation before proceeding. The potential tax consequences of getting this wrong could be substantial.

Has anyone actually calculated the annual costs of maintaining an LLC vs S-Corp for rentals? My CPA charges: - $800 for LLC tax return - $1,200 for S-Corp tax return plus - $600 for payroll if S-Corp Plus NY has that stupid LLC publication requirement that costs around $1,000 depending on which county your property is in! I'm wondering if the liability protection is even worth all these extra costs for a single duplex?

The cost analysis is really important and often overlooked! For NY specifically, you're also dealing with the LLC publication requirement which can be brutal - I paid almost $1,200 for mine in Nassau County. But here's the thing - you don't need an LLC to cost $800+ annually. If you keep it as a single-member disregarded entity, there's no separate tax return at all. The rental income just flows through to your Schedule E on your personal return. Your CPA is probably quoting you the price for a multi-member LLC taxed as a partnership, which does require Form 1065. For liability protection on a single duplex, consider whether adequate landlord insurance plus an umbrella policy might give you similar protection at a fraction of the cost. Many investors find that $1-2M in umbrella coverage costs under $300/year and covers most realistic liability scenarios. That said, if you're planning to grow your portfolio, the LLC makes more sense as a long-term strategy. Just make sure you're not paying for unnecessary tax filings!

Just wanna check I'm understanding this correctly. If my brokerage sends me a 1099-B showing I made $2,000 profit trading BOIL, but the K-1 shows $500 in ordinary income from the partnership, I need to report BOTH the $2,000 capital gain AND the $500 ordinary income? That seems like double taxation on the same investment. What am I missing here?

You're absolutely right that brokers should warn investors about K-1 complexity! It's actually required disclosure, but it's usually buried deep in the prospectus that most people don't read. Here's a pro tip for future ETF investing: Before buying any commodity or futures-based ETF, check the fund's website for their "tax information" section. If they mention issuing Schedule K-1s, you'll know what you're getting into. You can also look at the fund structure - if it says "LP" (Limited Partnership) anywhere, that's your red flag for K-1s. Most major brokers also have a filter in their research tools to exclude partnerships if you want to avoid K-1s entirely. It's under the "fund structure" or "tax structure" filters when screening ETFs. The good news is that once you've dealt with it once, it gets easier. And honestly, the extra tax complexity is often worth it for the specific exposure these funds provide - you just need to factor in the additional tax prep time/cost when deciding if the investment makes sense for your situation.