Just wondering... did you ever ask the partnership itself for an explanation? When I was in a similar situation, I emailed our partnership's accountant directly and they sent me a detailed breakdown of how my K-1 was calculated and why the distributions were different from my share of income. Sometimes going directly to the source is the fastest way to understand what's happening.

Your CPA is correct - you need to report the $24,863 from Line 1 on your Schedule E. This is a classic partnership taxation issue where your share of profits (11.53%) differs from your distribution percentage (3.06%). The key thing to understand is that partnerships are "pass-through" entities, meaning you're taxed on your allocated share of the partnership's income whether you receive it in cash or not. The partnership agreement clearly established different percentages for profit allocation versus distributions (likely due to that IRA loan conversion you mentioned). Think of it this way: the partnership earned income, and 11.53% of that income is legally "yours" for tax purposes even though the distribution formula gives you a smaller cash payout. The $17,012 difference between your taxable income and distribution is essentially being retained by the partnership, increasing your basis in the partnership. This might feel unfair since you're paying tax on money you didn't receive, but it's completely legal and common in partnership structures with special allocations. Your business partner may not fully understand the tax implications of the partnership agreement that was set up. I'd stick with your CPA's advice on this one - reporting only the distribution amount would likely trigger IRS issues down the road.

Everyone keeps talking about FreeTaxUSA and TurboTax, but I've been using Credit Karma Tax (now Cash App Taxes) for the past 3 years and it's completely free for federal AND state filing. It handles child tax credits, mortgage interest, and even small business income. I have 2 kids and it was super easy to enter their information and get the child tax credits. Might be worth looking into since you mentioned wanting to save money. The interface is pretty straightforward too.

Just wanted to add one more option to consider - I've been using FreeTaxUSA for 3 years after switching from TurboTax, and it's saved me hundreds. But this year I also discovered Tax Hawk, which is actually made by the same company as FreeTaxUSA but has a slightly different interface and sometimes different promos. For what it's worth, I have a pretty similar situation (married, 3 kids) and FreeTaxUSA worked great for claiming all the child tax credits correctly. The step-by-step guidance is really clear, and I never felt like I was missing anything important.

Have you considered TurboTax Self-Employed instead of H&R Block? I've used both for my photography business, and I found TurboTax more intuitive for small business stuff. It imports from Quickbooks really smoothly too. The biggest difference I noticed was that TurboTax asked more detailed questions about my specific industry that led to deductions H&R Block didn't catch. Though both are WAY cheaper than paying $450+ per form!

Don't sleep on finding a good local CPA. I was in your exact situation 2 years ago - small business with my husband, fed up with huge fees. Found a local CPA who specializes in small businesses and she only charges $275 for everything, including unlimited questions throughout the year. H&R Block employees usually aren't CPAs and may miss small business deductions. And I personally had a TERRIBLE experience with them losing some of my documents and filing late without telling me. Not saying all locations are bad, but definitely check reviews for the specific office!

I hate seeing so many people stressed about these codes! I had the exact same situation last year - 570 and 971 codes appeared together and I was panicking. Turned out the IRS just needed to verify my identity since I had moved and changed jobs. Got the CP05 notice about 10 days later asking for some documents, sent them in, and my refund was released 3 weeks after that. The whole process took about 6 weeks total but it wasn't as scary as I thought it would be. The key is to respond quickly once you get the notice and provide exactly what they ask for - no more, no less. Most of these reviews are really routine even though they feel terrifying when you're waiting. Try to stay calm and keep an eye on your mailbox! 🙏

I'm going through the exact same thing right now! Got my 570 and 971 codes on 02-24-2025 too and have been refreshing my transcript like crazy hoping for some movement. It's so frustrating not knowing what they're reviewing or how long it'll take. I called the IRS hotline yesterday but after being on hold for 2 hours they basically just told me to wait for the notice. The uncertainty is killing me because I have rent due next week and was really counting on this refund. Reading everyone's experiences here is both comforting and nerve-wracking - some people get resolved in 2 weeks, others are waiting months! I'm trying to stay positive but man, the IRS really needs to give us more transparency about what these holds are for. At least we're all in this together! 😤

Has anyone used QuickBooks for tracking these home office reimbursements in an S-corp? I'm trying to figure out the best way to handle the accounting part of this.

This is exactly the situation I found myself in when I switched from LLC to S-corp last year! One thing I learned the hard way is that you absolutely need to establish that Accountable Plan in writing BEFORE you start making reimbursements - don't just start paying yourself and figure it out later. I made the mistake of doing informal reimbursements for the first few months, and my accountant had to help me clean it up retroactively. Now I have a formal board resolution (even though I'm the only shareholder) that establishes the plan and specifies what expenses are covered, documentation requirements, and timing for submissions. For the home office calculation, I measure my dedicated office space monthly and keep a simple spreadsheet tracking utilities, mortgage interest, insurance, and maintenance costs. Then I apply my business percentage (about 12% in my case) and reimburse myself monthly. It's way more paperwork than the old Schedule C simplified method, but the tax benefits of the S-corp structure make it worthwhile. The key is treating yourself like any other employee - formal documentation, regular processes, and keeping everything at arm's length even though you own the company.