This is exactly the situation I was in two years ago with my consulting partnership. The debt basis rules definitely work as described here, but I want to emphasize something that caught me off guard: make sure your loan agreement includes a personal guarantee or similar provision showing you're truly at risk for the money. In my case, I had loaned $50K to the partnership but structured it poorly - the loan was secured only by partnership assets, which meant if the partnership failed, I might not be able to collect. During an audit, the IRS agent questioned whether I was truly "at risk" for the full amount, which could have limited my loss deductions even though I had sufficient basis. We ended up being okay because I could demonstrate that the partnership assets were worth more than the loan amount, but it was a stressful few months. The lesson is that having proper loan documentation is just the starting point - you also need to think about the economic substance of the arrangement. One more practical tip: if your partnership is going to be unprofitable for several years like you mentioned, consider whether it makes sense to structure some of your contributions as debt rather than equity from the beginning. This gives you more flexibility in claiming losses and potentially better tax treatment when you eventually get repaid.

Something that hasn't been mentioned yet is the importance of maintaining consistent treatment of your loans across all your tax filings. I learned this the hard way when I had a similar partnership situation. Make sure that if you're treating the loan as debt basis for claiming losses on your individual return, the partnership is also consistently treating it as a liability on their books and tax returns. Any inconsistency between how you and the partnership report the same transaction can trigger IRS scrutiny. Also, if your partnership agreement has special allocation provisions, be extra careful about how those interact with your debt basis calculations. I had a situation where our partnership agreement allocated certain types of losses disproportionately to partners who had made loans, and the IRS initially challenged whether this was economically reasonable. One more thing to consider: document your business reasons for making the loan rather than additional equity contributions. Having clear documentation of why the loan structure served legitimate business purposes (maintaining partnership flexibility, personal liability protection, etc.) can be crucial if you're ever audited. The IRS looks more favorably on arrangements that have substance beyond just tax benefits. Keep detailed contemporaneous records of all basis calculations, especially as the partnership moves through different phases of profitability. It becomes much harder to reconstruct these calculations years later if questions arise.

I'm so sorry for the loss of both your parents and the additional burden this irresponsible preparer has put on you during such a difficult time. This situation is infuriating but unfortunately not uncommon. Here's a prioritized action plan based on what's worked for others: **Immediate steps:** 1. File Form 56 (Notice of Fiduciary Relationship) with the IRS immediately to establish your legal authority 2. Submit Form 4506-T requesting wage and income transcripts for 2022 - this will show you all reported income even if no return was filed 3. Send the CPA a final certified letter demanding all documents within 10 business days, stating you'll file complaints if she doesn't comply **For getting help faster:** - Contact your state's Attorney General consumer protection division - they often have specific procedures for tax preparer misconduct - File complaints with your state board of accountancy and include all documentation of your attempts to retrieve the documents **Document reconstruction:** - Contact all potential income sources directly (pension providers, Social Security Administration, banks, investment companies) with death certificates and executor documents - Check with any financial advisors, insurance agents, or mortgage companies your parents worked with - they often keep copies of tax returns clients provided - Review bank statements for quarterly estimated tax payments to the IRS The IRS has reasonable cause provisions for situations exactly like yours. Keep detailed records of every attempt to contact this preparer - it will be crucial for penalty abatement later. You're handling this exactly right, and the IRS will work with you once you get through to them. Stay strong!

I'm so sorry for the loss of both your parents, Oliver. What an incredibly frustrating situation to deal with during an already difficult time. This preparer's behavior is completely unethical and unfortunately all too common. Based on the excellent advice already shared, I'd add one more resource that might help: consider reaching out to the Taxpayer Advocate Service (TAS) at 877-777-4778. They specifically help taxpayers who are experiencing financial difficulty, facing an immediate threat of adverse action, or haven't been able to resolve their tax issues through normal IRS channels. Your situation as an executor dealing with unfiled returns due to preparer misconduct would likely qualify for their assistance. TAS can often expedite transcript requests and help coordinate multiple issues with the IRS more efficiently than trying to handle each piece separately. They also have experience with reasonable cause penalty abatement for situations exactly like yours. Also, when you do get through to the IRS (whether through the regular channels or one of the services others have mentioned), ask specifically about "First Time Penalty Abatement" in addition to reasonable cause relief. If your parents had a clean compliance history before this situation, they may qualify for automatic penalty relief on certain penalties even without having to prove reasonable cause. Document everything you're doing to resolve this situation - your proactive efforts will work in your favor when it comes time to request penalty relief. You're handling this exactly right despite the preparer's complete failure to meet her professional obligations.

Does anyone use actual mileage tracker apps they recommend? I've been using MileIQ but it's getting expensive and doesn't always capture my trips correctly.

Great question! You're right to wonder about this - a mileage log alone isn't bulletproof, but it becomes much stronger when it's part of a consistent pattern of documentation. The IRS considers a contemporaneous mileage log (kept in real-time, not recreated later) as "adequate records" under Section 274 of the tax code. But what makes it credible isn't just the log itself - it's the supporting context. If you're audited, they'll look at whether your claimed mileage makes sense given your business activities, client locations, and income reported. Here's what strengthens a mileage log: consistency in your record-keeping style, logical trip patterns that align with your business needs, and supporting documentation like appointment calendars, client invoices showing service locations, or even credit card receipts from gas stations along your routes. The key is being genuine about your record-keeping from day one. Don't try to recreate months of logs at tax time - that's when it looks suspicious. Keep it simple: date, odometer start/end, destination, business purpose. The IRS audit rate is low, but if selected, having real contemporaneous records will serve you well.

Random question but has anyone used TurboTax Self-Employed for calculating the QBI deduction for an engineering LLC? I tried last year and it seemed to automatically disqualify me completely when I selected "engineering services" even though my income was under the threshold. Had to override it manually and now I'm worried about getting audited.

Great question about the QBI deduction! As an engineering consultant myself, I can confirm that you can absolutely qualify for the 20% deduction even though engineering is considered an SSTB. The key is your income level - since you're married filing jointly and under the $340,100 threshold, you should get the full deduction regardless of the SSTB designation. One thing I'd add to the excellent advice already given - when you do convert to S-corp (which sounds like a smart move for your income level), make sure you understand that the QBI deduction applies to the K-1 income from the S-corp, not your W-2 wages. So if you're paying yourself $120k in salary and taking $80k in distributions, only the $80k would be eligible for the QBI deduction. Also, definitely keep detailed records of your business activities. I've found that many engineering consultants actually do work that falls outside the strict SSTB definition - things like project management, training, or business process consulting. These activities might qualify for QBI even above the income thresholds if properly documented.

Just as a practical tip - I always staple the incorrect 1099 behind the corrected one and write "SUPERSEDED" in big letters across the front of the incorrect one. That way if I need to reference my paperwork later, there's no confusion about which form was the final version.

My accountant told me that income isn't technically "received" until you have access to it. Since your check was lost and the money went back into your Zazzle account, you technically haven't received it yet for tax purposes. The corrected 1099 showing $0 is the right approach by the company. You'll report that income in whatever tax year you actually get the money - either by successfully receiving a check or using the funds from your account in some way that constitutes receipt of income.