I went through this exact nightmare two years ago with my HVAC business! My CPA had been filing with two digits swapped in our EIN for an entire year. I was absolutely panicking when I discovered it during a bank loan application. Here's what worked for me: First, don't wait - contact the IRS Business & Specialty Tax Line immediately at 800-829-4933. Have your correct EIN assignment letter, copies of all tax returns filed with the wrong EIN, and proof of all payments made ready when you call. The agent I spoke with was actually very helpful and walked me through the entire correction process. You'll definitely need to file amended returns (1120X or 1040X depending on your business structure) for both 2022 and 2023. The key is including a detailed explanation letter with each amended return clearly stating this was an inadvertent error by your tax preparer. Use language like "clerical error in EIN transcription" and emphasize that all tax obligations were met in full and on time. The IRS agent told me they see this more often than people think, especially with single-digit transpositions. Since you made all your payments and were compliant with filing deadlines, they should waive any penalties. The whole process took about 3 months for me, but I had no penalties assessed. Also, definitely make your CPA handle all the paperwork for this correction at no charge since it was their mistake. If they push back on that, find a new tax professional who will be more careful with your critical business information.

I'm a small business owner who went through something very similar about 18 months ago. My bookkeeper had been using an incorrect EIN (off by one digit) for almost two full tax years before we caught it during a routine review. The most important thing is to act quickly and be completely transparent with the IRS. I called their Business & Specialty Tax Line and the agent was actually quite helpful once I explained it was an honest clerical error by my tax preparer. Here's my step-by-step process that worked: 1) Gathered all documentation - original EIN letter, copies of incorrectly filed returns, proof of all payments made, 2) Called the IRS to report the error and get a case number, 3) Filed amended returns with detailed explanation letters for each affected year, 4) Followed up regularly until everything was resolved. The whole process took about 4 months, but no penalties were assessed since I was proactive and could prove all taxes were actually paid on time. The IRS sees these EIN transposition errors more frequently than you'd think. One critical tip - make sure to check ALL your filings, not just income tax returns. This includes quarterly payroll reports (941s), annual unemployment reports (940), and W-2s. If any of those used the wrong EIN, you'll need to file corrections for those as well. Your CPA should absolutely handle this correction at no cost since it was their error. If they won't take responsibility, consider finding someone more reliable for future filings.

Does anyone know if there's a penalty for filing paper 1099s when you're required to e-file? One of my clients has 13 1099s but is really resistant to the e-filing process and wants me to just mail them in like we've always done.

For those looking at third-party services, I'd recommend getting quotes from multiple providers since pricing can vary quite a bit. I use a service that charges about $2 per 1099 filed, which includes the TCC usage and transmission to the IRS. One thing to watch out for - some services require you to upload all your data to their platform, while others can work with files exported from your existing accounting software. If you're handling sensitive client data, make sure any service you choose has proper security certifications and data protection policies. I always include a clause in my client authorization letters mentioning that I may use a third-party transmission service, just to keep everything transparent. Also, don't forget that you still need to provide copies to the recipients (the people/businesses who received the payments) by January 31st, regardless of whether you e-file or paper file to the IRS.

One more thing to consider - if your main employer offers any kind of reimbursement for mileage (even partially), make sure you're taking advantage of that too. Its not double dipping to get reimbursed from your employer AND deduct your self-employment miles separately. Just don't claim the same miles twice. Also, don't forget about potential home office deduction if you have a dedicated space for your consulting business. That can also increase the deductible miles since you'd count trips from your home office to clients as business miles rather than commuting.

Great question about vehicle expenses! As others have mentioned, you're absolutely fine to deduct mileage for your consulting business as long as you keep proper records. This is completely legitimate and not double dipping at all. One thing I'd add that hasn't been mentioned yet - make sure you're aware of the updated 2024 standard mileage rate, which is 67 cents per mile for business use (up from 65.5 cents in 2023). With 8,700 miles for your consulting work, that's a potential deduction of $5,829, which is definitely worth claiming properly. Also, since you're driving 50k miles annually, make sure you're factoring in the increased depreciation on your vehicle. Even though you can't deduct your W-2 job mileage, that heavy usage does affect your vehicle's value, so maximizing legitimate business deductions becomes even more important. Keep detailed logs with date, destination, business purpose, and odometer readings for each consulting trip. A simple spreadsheet or mileage tracking app works great for this. The IRS just wants to see that you can substantiate the business purpose of each mile claimed.

I want to add something that hasn't been fully addressed yet - the importance of understanding your state's tax implications as well. While everyone is focusing on federal Section 179 and bonus depreciation (which are absolutely crucial to get right), don't forget that states have their own rules for vehicle deductions. Some states don't conform to federal bonus depreciation rules, meaning you might get a large federal deduction but little to no state benefit. Other states have different caps or requirements. This can significantly impact your overall tax savings calculation. Also, for those just starting businesses, consider the cash flow implications beyond just tax savings. Yes, you might save $15,000-20,000 in taxes with a large vehicle deduction, but you're also tying up $60,000+ in capital that could be used for other business investments. Sometimes leasing or buying a less expensive vehicle that still meets your legitimate business needs makes more financial sense, even if the tax benefits are smaller. The key principle everyone should remember: let business needs drive the decision first, then optimize for taxes second. If you genuinely need a heavy-duty vehicle for your business operations, these deductions can provide substantial benefits. But buying an expensive vehicle solely for tax purposes, without a legitimate business need, is exactly what the IRS looks for in audits. Document everything, be conservative in your estimates, and when in doubt, consult a tax professional. The audit risk on vehicle deductions is real and the penalties for getting it wrong can be severe.

This thread has been incredibly educational! As someone who's been considering starting a consulting business and was curious about vehicle deductions, I really appreciate everyone sharing their real-world experiences and expertise. What strikes me most is how the "too good to be true" aspect that the original poster mentioned really rings true - while these deductions can provide substantial benefits, the compliance requirements are serious and the audit risk is real. The consistent message from everyone who's actually done this successfully seems to be: document everything meticulously, be conservative in your estimates, and make sure you have genuine business need first. I'm particularly grateful for the insights about state tax conformity issues and cash flow considerations. It's easy to get excited about potential tax savings without thinking through the full financial picture or understanding that federal and state rules might differ significantly. For anyone else reading this who's in a similar situation to the original poster, it seems like the key takeaways are: 1) Talk to a CPA before making major vehicle purchases, 2) Track your current driving patterns to understand realistic business use percentages, 3) Invest in good mileage tracking tools from day one, and 4) Remember that legitimate business need should drive the decision, not just tax optimization. Thanks to everyone who shared their experiences - this kind of practical advice from people who've actually navigated these rules is invaluable!

Not to muddy the waters, but have you considered the possibility that this might be Section 1231 property? If so, neither Schedule D nor reporting it as ordinary income on the front of the return may be correct - Form 4797 might still be relevant but for different reasons.

Based on all the discussion here, I think you're on the right track with Schedule D treatment, but I'd strongly recommend getting this reviewed by someone with deep S-Corp expertise before filing. The short holding period (10 days) is really the biggest red flag that could invite IRS scrutiny. One thing I haven't seen mentioned - make sure you're also considering the impact on your client's QBI deduction. If this gain ends up being treated as ordinary business income rather than capital gains, it could affect their Section 199A calculation. The characterization of this transaction could have ripple effects beyond just the immediate tax on the gain. Also, given that this is a $135K gain, the stakes are high enough that it might be worth investing in a private letter ruling if your client is concerned about audit risk. It's expensive but would give you definitive guidance for this specific situation.