These codes got me stressing so hard I started dreaming in numbers 🤣 The IRS needs to make this stuff easier to understand for regular folks istg

Been dealing with these codes for months and finally figured it out! Code 290 = they're adding tax/adjustments to your account (bad news usually), Code 291 = they're reducing/removing previous assessments (good news!). If you see both, it means they made an adjustment then partially or fully reversed it. The key is looking at the dates and amounts to see the timeline. Pro tip: the cycle dates next to these codes tell you when each action happened, so you can follow the story of what the IRS did to your return 📊

This is a great point about framing the negotiation properly. I'd add that your friend should also consider the timing element here - if the business continues operating with losses, that sweat equity partner will keep receiving negative K-1s that could complicate their personal tax situation. Another angle to consider: since this partner never contributed cash, they likely don't have sufficient "basis" to deduct all the losses that have been allocated to them anyway. This means they may have suspended losses on their personal return that they can't currently use. A clean exit might actually be more valuable to them than continuing to accumulate unusable tax losses. Your friend might want to get a tax professional to calculate what the partner's actual tax basis is versus their capital account balance. These are often very different numbers, and the basis calculation might show that the partner's economic position isn't as strong as the capital account balance suggests. The key is documenting everything properly so the buyout is structured in a way that's defensible to the IRS and fair to all parties involved.

I've dealt with this exact situation multiple times, and the suspended loss angle is absolutely critical leverage that most people miss. In one case, we had a sweat equity partner with a $85k negative capital account who was demanding full payment. When we calculated their actual tax basis (which was essentially zero since they never contributed cash), we discovered they had over $70k in suspended losses sitting on their personal return that they couldn't use. We presented this analysis showing that continued partnership ownership would likely generate more unusable losses, while a buyout - even at a significantly reduced amount - would allow them to trigger some of those suspended losses as a capital loss on the sale of their partnership interest. The partner ended up accepting a $15k settlement because they realized the alternative was continuing to receive K-1s with losses they couldn't deduct, plus the complexity of tracking suspended losses for potentially years. The key is getting a tax professional to run the numbers on both the capital account AND the tax basis/suspended loss calculation. Often the partner's actual economic position is much weaker than the capital account suggests, especially when they never contributed actual capital but have been allocated years of losses. This analysis completely changes the negotiation dynamic and often leads to much more reasonable settlement amounts.

Has anyone ever had success getting the IRS to move quicker on resolving an amended return situation? My accountant said amended returns are taking 6-8 months to process right now, but meanwhile I'm getting threatening CP504 notices like the original poster. It's so frustrating!

I totally understand your stress - CP504 notices are designed to get your attention and they definitely do that! Your accountant's reaction actually makes sense to me. When you've been trying to resolve an issue through normal channels for months without success, sometimes escalation (like a CP504) can actually work in your favor by giving you access to different departments or priority handling. The fact that your accountant strongly advised against paying is significant. If you pay the disputed amount, you're essentially validating the IRS's incorrect assessment, and getting refunds back from the IRS is notoriously slow and difficult. It's much better to resolve the underlying error first. That said, I'd recommend asking your accountant for a detailed timeline of what's been submitted and when you can expect resolution. Also ask if he's requested any formal collection holds. Even though he seems confident, having a clear picture of the process will help reduce your anxiety. You could also consider calling the IRS yourself (or using a service to help you get through) just to verify what's on file and confirm the status - not to contradict your accountant, but just for your own peace of mind.

Serious question - what happens if your friend just ignores the W-2G? Like the casino sent the form to the IRS, but if he has no other income and has been a non-filer for years, would the IRS really come after him for a small jackpot? Just wondering if it's even worth the hassle.

I went through something similar a few years ago. Had a decent casino win with a W-2G but was basically broke otherwise. The key thing to understand is that even though your friend has been a non-filer, that W-2G creates a filing requirement regardless of his other income. However, the good news is exactly what Sophia pointed out - if that $1600 is his only income for the year, it's well below the standard deduction threshold. He'll need to file a return to report it, but he won't actually owe any federal income tax. The IRS just needs to see that return to match against their records. I'd definitely recommend he files rather than ignoring it. The IRS matching system is pretty good at catching unreported gambling income, and it's much easier to file a simple return now than deal with notices and penalties later. Most free tax software can handle a basic return with just a W-2G.

I think you could also try entering $0 as your prior year AGI. I've heard that works for first-time filers, might work in your situation too? Worth a try before going through all the transcript hassle.

I went through this exact same nightmare last year! Here's what worked for me when I was completely stuck: If you have any financial institution that you bank with, check if they offer free tax transcript services. Many credit unions and some banks can help you get IRS transcripts through their secure portals. I found out my credit union had this service buried in their online banking under "Financial Tools" - got my transcript in about 10 minutes without having to deal with the IRS website at all. Also, if you remember which tax software you used last year (TurboTax, H&R Block, etc.), try logging into that account even if you don't think you saved anything. Most of these services keep your prior year data accessible for several years, and you might be surprised what's still there. I found my complete 2022 return in my old TurboTax account even though I thought I'd deleted everything. The paper filing route isn't the end of the world if these options don't work out, but definitely try the transcript services first. Way faster than waiting weeks for the IRS to process paper returns!