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Just want to add that I consulted with a real estate-specific CPA, and they said most people focusing on business entities are missing the biggest tax advantage: doing a 1031 exchange to defer capital gains when selling. I've done this twice now to upgrade from smaller to larger properties without paying taxes on the appreciation. Saved well over $70k in taxes so far.
That's really interesting - I've heard about 1031 exchanges but haven't looked into them much. Did you work with a specific company to handle the exchange? I'm not looking to sell right now, but it's definitely something to keep in mind for the future.
Yes, you need to work with a qualified intermediary - it's not something you can DIY because the IRS rules are extremely strict. I used First American Exchange Company for both of mine. The key is planning ahead - you have only 45 days after selling to identify potential replacement properties, and 180 days to complete the purchase. The intermediary holds your sale proceeds in escrow, so you never touch the money (which would disqualify the exchange). Their fee was about $1,200, which was nothing compared to the tax savings. Just make sure your next property is equal or greater in value than what you sell, or you'll pay taxes on the difference.
This is such a helpful thread! I'm in a similar situation with two rental properties and have been wondering about the same thing. Based on what everyone's shared, it sounds like the business entity route might not be the magic bullet I was hoping for, especially since I'm probably not at the income level where S-corp election would make sense. I'm really intrigued by the cost segregation and missed deduction strategies that @Butch Sledgehammer and @Freya Ross mentioned. I've been doing my own taxes with TurboTax, but it sounds like I might be leaving money on the table by not having a more detailed analysis done. The 1031 exchange info from @Elin Robinson is also really valuable - I hadn't considered that as part of my overall tax strategy, but it makes sense to think long-term about how to defer gains when upgrading properties. Thanks to everyone for sharing their real experiences rather than just theoretical advice!
Quick heads up from someone who works in this area - the IRS has been cracking down HARD on one-person religious organizations in the last few years. Too many tax scams using "churches" as fronts. They have a special audit flag for orgs where the founder is the only member and receiving compensation. This doesn't mean you can't do it legitimately! But you need to be EXTRA careful about documentation. I recommend recruiting at least 2-3 other people as board members (even if they're not "members" of your religion) and make sure you follow EVERY formality - regular documented meetings, clear bylaws, impeccable financial records.
Is this still true even for organizations that don't take a salary? I want to start something similar but I don't plan to receive any compensation personally - all funds would go to outreach/materials.
@Dylan Wright Yes, the IRS scrutiny applies even if you re'not taking compensation. They look at several factors beyond just salary - things like whether the organization benefits you personally in other ways housing, (travel, personal expenses being paid ,)whether there s'legitimate religious activity happening, and whether the structure truly operates as a separate entity from your personal affairs. The key is demonstrating that your organization has genuine religious purpose and follows proper nonprofit governance, regardless of compensation. Having a diverse board helps show independence, and maintaining detailed records of actual religious activities services, (outreach, educational programs is) crucial. Even small organizations need to prove they re'doing legitimate ministry work, not just collecting tax-free donations.
As someone who went through this process recently, I'd strongly recommend consulting with a nonprofit attorney before accepting any donations, even small ones. The complexity around religious organizations is real, and the stakes are high if you get it wrong. One thing that helped me was creating a timeline: first establish the legal entity through your state, then get your EIN, then file for 501(c)(3) status. Only after that approval should you actively solicit donations. In the meantime, you can absolutely talk about your mission and build interest without taking money. Also consider starting with a fiscal sponsorship arrangement through an established religious organization while you get your paperwork sorted. This lets you accept tax-deductible donations legally while maintaining your independence. Many denominational bodies offer this service even for non-affiliated religious groups. The IRS publication 1828 "Tax Guide for Churches and Religious Organizations" is incredibly helpful - it's free and covers most of these scenarios in detail.
idk why ppl think they can trick the irs... they literally know everything about our money š
Just to add to what everyone's saying - even if you only worked 3 weeks, if you received ANY pay, it counts as taxable income for 2024. The IRS matches up employer reports with your tax return, so they'll definitely notice if something's missing. Better to report everything upfront than deal with notices later. If you haven't received the W-2 by early February, you can file Form 4852 as a substitute, but try contacting your old employer first.
As someone who's dealt with multiple IRS notices over the years, I want to add that the 12C letter will have very specific instructions about what documentation to send and where to send it. Don't send everything you have - only what they specifically request. I made that mistake once and it actually delayed my case because they had to sort through unnecessary paperwork. Also, if you're missing any of the requested documents (like a lost receipt), you can often substitute with bank statements showing the transaction, canceled checks, or even a sworn statement explaining the missing documentation. The key is to respond within the timeframe given - usually 30 days from the letter date - and to be thorough but focused in your response.
This is really valuable advice about being specific with documentation. I'm curious - when you mention using bank statements or canceled checks as substitutes, do those need to be certified copies or are regular printed statements from online banking sufficient? Also, how detailed should the sworn statement be if you need to explain missing documentation?
Regular printed statements from online banking are typically sufficient - the IRS doesn't usually require certified copies for standard documentation requests like a 12C. For sworn statements, keep them concise but specific: include the date of the expense, amount, business purpose, and reason why the original documentation is unavailable (lost, destroyed, etc.). I usually format it as a simple affidavit with my signature and date. The IRS Publication 463 has some good examples of acceptable record-keeping alternatives if you need more guidance.
I received a 12C letter about 6 months ago regarding some business equipment deductions I claimed as a freelance photographer. The process was actually much smoother than I anticipated. The letter clearly outlined that they needed receipts for camera equipment purchases over $2,500 and documentation showing the business use percentage. I gathered my purchase receipts, created a simple log showing when I used the equipment for paid shoots vs personal use, and included a brief cover letter explaining my business model. The whole thing was resolved in about 5 weeks with no changes to my return. One tip: if you're still waiting for the letter to arrive, start organizing your 2023 tax documents now - receipts, 1099s, bank statements, etc. Having everything organized made my response so much easier when the time came.
Daniela Rossi
Try 800-829-0582 extension 652. Call exactly at 7:00am EST. Press 1 for English then 2 for tax questions. When asked for SSN, enter it slowly. Don't press anything when asked about forms. Wait through two messages. You'll get a person about 50% of the time. I've gotten through three times using this method.
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Laila Prince
I'm going through something very similar! Filed on February 15th with solar credits and my transcript has been blank for weeks too. The "still being processed" message on WMR is so frustrating when you're expecting a refund. Reading everyone's experiences here really helps - it sounds like the solar credit forms are just causing normal delays this year. I've been checking my transcript obsessively but maybe I should just be more patient. Has anyone found that calling multiple times actually helped speed up the process, or did your returns just eventually process on their own timeline regardless?
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Giovanni Mancini
ā¢I'm in the exact same boat as you! Filed February 8th with solar credits and have been checking my transcript daily like it's going to magically update overnight. From what I'm reading here, it sounds like calling doesn't actually speed things up - the returns just process when they're ready. I think I'm going to stop obsessively checking and try to be patient like everyone suggests. At least we know we're not alone in this waiting game! The solar credit delays seem to be affecting a lot of people this year.
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