Has anyone actually been audited specifically on LLC distributions? I've been taking money out of my real estate LLCs for years and just calling everything "distributions" without much thought. I'm starting to worry I've been doing it wrong.

This is a great question that many real estate LLC owners struggle with. You're right that in a passthrough entity, you're taxed on your allocable share of income regardless of distributions, but the classification still matters for several important reasons: 1. **Basis tracking**: Your outside basis in the LLC (which starts with your initial investment) increases with allocated income and decreases with distributions. If distributions exceed your basis, the excess becomes taxable gain - this is true even in passthrough entities. 2. **Capital account maintenance**: Proper capital account tracking is required by the regulations and affects how profits/losses are allocated among members. Return of capital reduces your capital account without affecting current-year allocations. 3. **Future implications**: If you ever sell your LLC interest or the LLC sells property, having accurate basis and capital account records becomes critical for determining gain/loss. While you don't need to classify each distribution in real-time, I'd recommend working with your accountant to ensure your basis and capital accounts are being tracked properly. Many people think "passthrough = no distribution issues" but that's not entirely accurate. The IRS can definitely scrutinize distribution patterns, especially if they exceed basis or seem inconsistent with reported income.

This is exactly why I always tell people to complete the verification even if the system seems to have moved forward without it. I went through something similar in 2023 - got my refund without verifying, thought I was golden, then boom - CP75C notice in my mailbox 6 weeks later. Had to scramble to get verified through ID.me before they clawed back my refund. The thing is, the IRS has multiple systems that don't always talk to each other perfectly. Your refund processing system might release the funds due to timing constraints, but the Taxpayer Protection Program database still has you flagged. It's like two different departments working off different spreadsheets. My advice? Don't spend that refund money yet. Set it aside in a separate account and proactively complete your ID verification through ID.me or by calling the verification hotline. Better to be safe than sorry, especially when you're relying on that money for expenses. The verification process itself isn't too bad once you get through - just have your documents ready.

This is such a tricky situation! I went through something similar in 2022 - got my refund without verifying, then about 8 weeks later received a CP75 notice requiring verification. The letter gave me 30 days to respond, but I called the TPP line within a week just to be safe. What saved me was keeping detailed records of everything. I took screenshots of my WMR status changes, saved all the emails, and documented the timeline. When I finally got through to an agent, having that documentation helped them understand my case quickly. One thing I learned: even if you get the refund, don't treat it as "cleared" until you've gone at least 6 months without any follow-up notices. The IRS post-processing reviews can take months to catch up, especially during heavy filing seasons. My suggestion would be to call the TPP verification line (833-558-5500) proactively and ask about your specific case. They can tell you definitively whether you still need to verify, even if your online status says "refund received." Better to spend 2 hours on hold now than deal with a surprise clawback later when you've already budgeted that money for expenses.

Don't forget there are other requirements for the EV credit besides just income limits! The vehicle has to be assembled in North America and the battery components/minerals have requirements too. I wasted so much time figuring out my AGI situation only to discover the car I wanted didn't qualify because of where the battery minerals came from.

Just wanted to share my experience since I went through this exact situation last year. I was single making $142k and had about $15k in capital gains from selling some tech stocks. I was really worried about going over the $150k limit. What I learned is that it's not just about the capital gains - you also need to consider any other income changes throughout the year like bonuses, side income, or even things like unemployment compensation if you had any job changes. But more importantly, don't forget that certain deductions can help lower your AGI too. I ended up maximizing my 401k contributions (which reduces your AGI) and also made a traditional IRA contribution since I was still eligible. Between those two moves, I was able to stay under the threshold even with the capital gains. The EV credit saved me way more than the tax benefits I gave up by not doing a Roth IRA that year. Also, make sure you're looking at the right year - the income limits apply to the tax year you take delivery of the vehicle, not when you order it. So if you order now but don't take delivery until 2025, it's your 2025 income that matters.

Late to this conversation but wanted to add something I haven't seen mentioned yet - the audit notice probably specifies a response deadline, usually 30 days from the date of the letter. Make sure you respond by that deadline even if it's just to request an extension for gathering documentation! I made the mistake of missing the deadline when I was audited, and it made the whole process much more complicated. You don't want the IRS to make a determination without your input. Also, if you do end up owing money, know that the IRS is generally willing to set up payment plans. You won't have to "work it off" all at once. Just make sure to file Form 9465 (Installment Agreement Request) if you need a payment plan.

I went through something very similar with my 2020 return! Got audited for claiming the EV credit on what turned out to be a regular hybrid (Toyota Highlander Hybrid). I was terrified at first, but it actually worked out okay. Here's what happened in my case: I owed back about $7,500 in credit plus interest (around $300), but the IRS completely waived all penalties after I submitted Form 843 with a letter explaining that I relied on my tax preparer's advice and provided accurate vehicle information. The key was documenting that I gave them the correct VIN and vehicle details - it was their job to verify eligibility. My preparer initially tried to dodge responsibility, but I filed Form 14157 with the IRS to complain about them. That got their attention real quick, and they ended up covering the interest portion as a "goodwill gesture" to avoid further issues. The whole process took about 4 months from audit notice to resolution, but responding quickly and thoroughly made all the difference. Don't panic - honest mistakes happen and the IRS knows it!

This is exactly what happened to me last month! I had some dividend income that apparently triggered the verification hold. The status change you're describing - from "still being processed" with the verification notice to just "being processed" without it - is definitely a positive sign. In my case, I got the "approved" status 4 days later and the refund was deposited 2 days after that. The removal of that verification message is key - the IRS system doesn't drop that notice unless they've actually completed whatever identity verification they needed to do. Since you mentioned investment income, that's almost certainly what triggered the extra review, but it sounds like you're through the worst of it now. Keep checking WMR daily and you should see movement soon!

This is really great news! I went through almost the exact same thing earlier this year when I had some stock sales to report for the first time. That status change from "still being processed" with the verification notice to just "being processed" without it is definitely the signal you want to see. The IRS verification system is pretty thorough - they don't remove that verification prompt unless they've actually completed their identity confirmation process. Investment income, especially if it's new for you, almost always triggers some additional review, but it sounds like you've cleared that hurdle. In my experience, once you see that status change, you're typically looking at about 5-10 business days before you see the "approved" status, and then another 1-3 days after that for the actual deposit. The fact that the verification notice completely disappeared is the key indicator here - that doesn't happen unless they're satisfied with whatever checks they needed to run. Keep monitoring WMR daily, but you should be in good shape now. The hardest part (the verification hold) appears to be behind you!