Just wondering - did the state notify you when they applied your overpayment to a different year? We had something similar happen but never received any communication. Only discovered it when preparing for this year's filing.

This is a common issue that many businesses face! Since you're on cash basis accounting, the journal entry suggested by others is correct - you'll want to debit your tax expense account and credit the franchise tax receivable to remove it from your balance sheet. One additional tip: consider setting up a monthly or quarterly reconciliation process for your tax accounts to catch these situations earlier. States often apply credits and make adjustments without notification, so regular review of your receivables against actual refunds received can help identify discrepancies before they become bigger accounting headaches. Also, make sure to keep detailed documentation of the state's communication about where they applied your overpayment. This kind of supporting documentation is invaluable if you ever face questions about the adjustment during an audit or review.

I'm dealing with a very similar situation right now - sold my consulting business in January and the new owners have been completely unresponsive about filing Form 8822-B. I've been getting IRS notices for their quarterly payroll taxes and it's been keeping me up at night worrying about potential liability. Reading through all these responses has been incredibly reassuring. It's clear this is a common problem and there are established ways to resolve it even when the new owners won't cooperate. I'm particularly encouraged by the success stories from @StarSurfer and @Adriana Cohn with sending comprehensive documentation packages directly to the IRS. One thing I want to add based on my research - if anyone is dealing with this situation, make sure to keep copies of ALL correspondence you receive from the IRS, even if it's meant for the new owners. This creates a paper trail showing when you started receiving notices for periods after your sale date, which helps establish the timeline and your proactive efforts to resolve the issue. I'm going to follow the approach several people have outlined: gather my Asset Purchase Agreement, final tax returns, state transfer documentation, and send it all via certified mail with a detailed cover letter explaining the ownership change. It's reassuring to know that even without the 8822-B being filed, the IRS has procedures to handle these situations when you provide proper documentation. Thanks to everyone who shared their experiences - it's made what felt like an impossible situation seem much more manageable!

I'm going through this exact nightmare right now - sold my digital marketing agency in September and the buyers completely ghosted me when I asked about filing Form 8822-B. I've been getting IRS notices for their employment taxes and business income tax obligations, and honestly it's been one of the most stressful experiences of my life. What's really helped me sleep better after reading everyone's advice here is understanding that this is actually a procedural issue with established solutions, not some unique disaster. The consistent theme seems to be that comprehensive documentation sent directly to the IRS can resolve this even when the new owners are uncooperative. I'm putting together my documentation package this weekend - Asset Purchase Agreement with transfer dates highlighted, my final business tax returns, state registration transfer proof, and a detailed cover letter explaining the timeline. Planning to send it certified mail and also fax a copy to create multiple touchpoints with the IRS. One thing I learned from my CPA is to include a specific statement in the cover letter requesting that all future correspondence related to post-sale periods be directed to the new responsible party, and to provide their business address from the sale agreement. This gives the IRS an alternative address to use even without the 8822-B being filed. Thanks to everyone who shared their experiences - knowing that others have successfully resolved this exact situation makes it feel manageable rather than hopeless. Will definitely update this thread once I hear back from the IRS!

4 Don't forget that for the 2025 tax year, you can only deduct charitable contributions up to 60% of your adjusted gross income for cash donations to public charities like churches. If your donation is larger than that, you can carry forward the excess for up to 5 years. Also, inheritance itself isn't taxable income at the federal level, but if the house appreciated in value between when you inherited it and when you sold it, you might owe capital gains tax on that growth. The charitable donation might help offset some of that tax liability.

Just wanted to add something important that I learned the hard way - if you inherited the house and then sold it, make sure you understand the "stepped-up basis" rules. When you inherit property, your cost basis is typically the fair market value on the date your grandmother passed away, not what she originally paid for it. This means if the house was worth $200k when you inherited it and you sold it for $205k, you'd only owe capital gains tax on that $5k difference, not on your grandmother's original purchase price. This can make a huge difference in your tax liability and might affect how much you want to donate. Also, since you're planning to donate 10% as a tithe, keep in mind that regular tithing throughout the year can be a good tax strategy if you're consistently over the standard deduction threshold. Many people bunch their charitable giving into alternating years to maximize the tax benefit.

Based on what others have shared here, it sounds like you're likely in the clear for Form 926 with such a tiny ownership stake (0.00003%). The 5% threshold exemption should definitely apply to you. That said, I'd strongly recommend double-checking your K-1 supplemental materials for any mentions of foreign reporting requirements. Even though you don't need Form 926, there could be other foreign forms required depending on what types of investments the PTP holds overseas. I've learned the hard way that it's always better to be overly cautious with foreign reporting requirements - the penalties can be severe if you miss something. If you can't find clear guidance in your partnership documents, it might be worth getting a definitive answer from a tax professional or the IRS directly rather than guessing.

Great question, and you're absolutely right to be cautious about this! With your 0.00003% ownership stake, you should be well under the 5% threshold that exempts you from filing Form 926 personally. The partnership itself would handle the reporting for their transfer to the foreign corporation. However, I'd echo what others have mentioned about checking for other potential foreign reporting requirements. Even though Form 926 doesn't apply to you, your K-1 might contain information that triggers other forms like 8621 for PFICs or 8938 for foreign financial assets. One practical tip: when you get your Schedule K-1, look specifically for any codes in boxes 11, 13, 16, or 17 that relate to foreign activities. PTPs are usually pretty good about including supplemental statements that explain any additional filing obligations that flow through to partners. The good news is that with such a minimal ownership percentage, you're unlikely to hit the thresholds for most foreign reporting requirements, but it's still worth a quick check to be absolutely certain. The penalties for missing required foreign forms can be harsh, so better safe than sorry!

This has been an incredibly informative thread! As someone who just received similar 1099-C forms from a different private lender, I wanted to add one more consideration that my tax attorney mentioned. Even though the American Rescue Plan Act provides the federal exemption through 2025, it's worth noting that this is temporary legislation. If you're planning any major financial decisions based on the tax-free nature of this forgiveness (like taking on new debt or making large purchases), just keep in mind that similar forgiveness after 2025 would likely be taxable again under current law. Also, for anyone who might be in this situation in future years, the exemption specifically requires that the loans were forgiven between January 1, 2021, and December 31, 2025. So the timing of when Discover (or other lenders) actually processed the forgiveness matters, not just when you received the 1099-C forms. One practical tip: if you're using a tax preparer, bring all this documentation we've been discussing, but also ask them to put a note in your file about the American Rescue Plan Act exemption. If you get questioned by the IRS later, having that professional documentation trail showing the exemption was considered will be helpful. The original poster should definitely feel confident proceeding with the tax exemption approach based on all the evidence presented here. This community discussion has been more thorough than most professional consultations I've seen!

This has been such a comprehensive and helpful discussion! I'm in a similar situation with private student loan forgiveness and wanted to add one more resource that helped me understand the legal framework. The key section of the tax code is IRC Section 108(f)(5), which was temporarily modified by the American Rescue Plan Act. This section now excludes from gross income any amount of student loan forgiveness between 2021-2025, regardless of whether it's federal or private, as long as it meets the "qualified education loan" definition. What really sealed it for me was finding IRS Notice 2021-58, which specifically addresses the tax treatment of student loan forgiveness under the American Rescue Plan Act. While it doesn't explicitly mention private loans, it refers broadly to "student loan indebtedness" that meets the qualified education loan requirements. For anyone still on the fence about whether this exemption applies to private loans like Discover's, the fact that major lenders are explicitly stating the forgiveness is tax-exempt on their websites suggests their legal teams have thoroughly vetted this position. Companies like Discover wouldn't make such definitive statements about tax treatment without solid legal backing. One final tip: if you use tax software, look for a specific section about "cancelled debt" or "1099-C reporting" - most major programs now have built-in logic to handle the American Rescue Plan Act exemptions. Just make sure to indicate that it was student loan forgiveness, not other types of cancelled debt. Thanks to everyone who shared their experiences - this thread should be bookmarked for anyone dealing with private student loan forgiveness!