Called the IRS yesterday about my still processing status. They said I need to verify identity. Don't wait like I did - call if ur stuck on still processing for more than 3 weeks!

This is super helpful! I've been dealing with the same confusion. My status changed from "processing" to "still processing" about 2 weeks ago and I wasn't sure if that was bad news. Based on what everyone's saying here, sounds like I should probably call the IRS soon to see if they need anything from me. Thanks for asking this question - really needed this clarification!

Is anyone else confused about why the OP received $1000 in distributions when their 1% share of the partnership showed a $5100 loss? How can the partnership distribute cash if it's operating at a loss?

This is a great example of how confusing K-1s can be for new partners! The key thing to remember is that partnership accounting follows the "conduit" theory - the partnership doesn't pay taxes, it just passes through its income and losses to the partners. Your $1,000 in distributions should be reported in Box 19 (code A) of your K-1, and these reduce your basis in the partnership rather than creating taxable income. The $5,100 loss you're seeing is your 1% share of the partnership's total loss, which likely includes depreciation on the rental property. Since you mentioned you're completely passive in this investment, your losses are subject to the passive activity loss rules under Section 469. This means you can only use these losses to offset passive income from other sources. If you don't have other passive income, the losses get suspended and carry forward until you either generate passive income or dispose of your entire interest in the partnership. Make sure to keep good records of your basis and any suspended losses - you'll need this information for future tax years and eventually when you sell or dispose of your partnership interest.

Just to add another perspective - make sure you understand the state tax implications too, not just federal. Some states have different rules for how they treat LLC income and business transitions. I had a similar situation where I thought I had everything figured out for federal taxes, but then got a surprise notice from my state tax authority because they had different requirements for reporting the business structure change. Each state can have its own rules about when income is attributed to you personally vs. the business entity. It's worth checking with your state's tax department or a local tax professional who knows your state's specific requirements.

This is a complex situation that definitely requires careful documentation. Based on what you've described, you'll likely need to file taxes for multiple periods with different business structures. For January-February (sole proprietor period), you'll report that income on Schedule C and pay self-employment taxes on it - even though you later moved the money to the LLC account. The IRS looks at when income was earned, not where it ended up. For the LLC period (March-May), you should receive a K-1 showing your share of the LLC's income/losses for those months. Make sure your former partner provides this to you, as the LLC is required to issue K-1s to all members who owned interests during the tax year. The transfer of your LLC ownership to your partner is also a taxable event that needs to be reported, even if you received no compensation. You may be able to claim a loss on this transaction depending on your basis in the LLC. I'd strongly recommend getting professional help with this since you're dealing with multiple business structures and ownership changes in one tax year. The cost of a tax professional will likely be worth avoiding potential penalties or missed deductions.

One thing nobody's mentioned is that collectibles are taxed at a higher rate than other capital gains - up to 28% instead of the normal lower capital gains rates. If you did make a substantial profit on some rare comics or cards, it might be worth talking to a tax professional.

I worked at a collectible shop for years. Unless you've got some really valuable cards or rare comics, most people lose money on this stuff when you factor in inflation. Don't stress too much if most of what you sold was medium-value collectibles. The IRS is looking for major unreported income, not the $50 you made on your old X-Men comics.

For finding CPAs who specialize in partnership taxation, I'd recommend starting with the AICPA (American Institute of CPAs) directory - you can search by specialization and location. Look for CPAs who specifically list "partnership taxation" or "multi-state tax compliance" as specialties. Another great resource is asking other partners at your firm for referrals. Since you mentioned talking to a senior partner, they might be able to recommend someone they've worked with successfully. Many partnerships end up using the same few accounting firms because they understand the specific industry and partnership structure. When you do consult with a CPA, come prepared with your K1, any partnership statements about composite filings, and a list of all states where your partnership operates. A good partnership tax specialist should be able to quickly identify which states require separate filings and which are covered by composite returns. They should also be familiar with common partnership deductions and credits you might be missing. The consultation approach really worked well for me - I got expert guidance on the tricky parts but still saved money by handling the routine federal filing myself. Plus, you'll learn enough from that first consultation to feel more confident in future years.

I went through something very similar when I became a partner in a multi-state firm last year. The key insight that saved me a lot of stress was understanding that "filing requirements" and "actual filing needed" are two different things when you have composite filings. One thing I'd add to the great advice already given - make sure you understand the timing differences between states. Some states have different deadlines than the federal April 15th deadline, and a few require estimated payments on different schedules. This caught me off guard my first year. Also, regarding the Canadian portion - if your partnership has filed a T5013 partnership return in Canada and handled the Canadian tax obligations, you typically just need to report your share of the Canadian-source income on your US return. The US-Canada tax treaty generally prevents double taxation, but you want to make sure you're claiming the foreign tax credit properly if any Canadian taxes were paid on your behalf. The hybrid approach others mentioned really is the sweet spot for the first year. Get professional guidance on the multi-state complexities, but handle the straightforward federal portion yourself. Once you understand your specific situation, it becomes much more manageable in subsequent years.