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Has anyone else had an issue where their tax software didn't generate the right forms? I used TaxAct this year and had a similar problem with some investment sales not showing up on the right forms even though I entered everything correctly.
I went through this exact same situation two years ago and can confirm that responding to the CP2501 notice with proper documentation is the right approach. Don't panic - this is actually a very common issue that gets resolved easily once you provide the right information. Here's what worked for me: I wrote a clear letter explaining that the property was my primary residence for over 2 years, included copies of my purchase documents showing the original cost basis, the 1099-S form, and proof of residence (utility bills, voter registration, etc.). I also calculated the exact gain and showed it was well under the $250k/$500k exclusion limit. The key is being thorough in your documentation. Include everything that proves: 1) When you bought the house, 2) When you sold it, 3) That it was your primary residence for at least 2 of the last 5 years, and 4) Your actual capital gain calculation. I mailed everything certified mail and got a letter back about 8 weeks later confirming no additional tax was due. The IRS just needed to see that I was aware of the sale and properly claiming the exclusion. Don't amend your return unless you absolutely have to - responding to the notice directly is much cleaner and faster.
This is really helpful advice! I'm curious about the timeline - you mentioned getting a response in 8 weeks. Did you follow up at all during that time, or did you just wait it out? I'm always worried that my mail gets lost or they need additional information and I won't know about it until much later. Also, do you remember if you included any specific tax code references in your letter, or did you just explain the situation in plain English?
I just waited it out and didn't follow up during those 8 weeks. I figured if they needed more information, they would send another notice. In retrospect, that might have been risky, but it worked out fine. As for the letter, I kept it in plain English but did reference Section 121 of the Internal Revenue Code (which covers the primary residence exclusion) just to show I knew what I was talking about. I didn't get too technical with citations though - I focused more on clearly stating the facts and providing solid documentation. The most important thing is making sure your letter is organized and easy to follow. I used bullet points to list out each requirement for the exclusion and how I met it. Something like: "β’ Ownership test: Owned the property from [date] to [date] (more than 2 years)" and so on. This makes it easy for the IRS reviewer to quickly see that you qualify without having to dig through paragraphs of explanation.
Has anyone dealt with the timing issue if you filed amended 941s to claim the ERC after you already filed your 1120-S for that tax year? I'm in this situation now - claimed ERC for 2021 quarters but already filed my 2021 1120-S before receiving the credit.
You'll need to file an amended 1120-S (Form 1120-S/X) to reduce the wage expense for the year the wages were paid, not when you received the credit. I just went through this exact situation with my company.
I've been dealing with this exact issue for my S-corp and can confirm what others have said - you absolutely need to reduce wage expenses by BOTH the refundable and non-refundable portions of the ERC on your 1120-S. The key thing to remember is that the ERC is essentially reimbursing you for wages you already deducted as business expenses. If you don't reduce your wage expense by the full ERC amount, you're getting a double tax benefit - once from deducting the wages and again from the credit. I'd also recommend keeping detailed documentation of how you allocated the ERC reduction between different wage categories (officer compensation vs regular wages) in case the IRS has questions later. This becomes especially important if you're claiming QBI deductions since the wage amounts on your K-1s will be affected by these reductions.
This is exactly the guidance I needed! I'm also dealing with this on my S-corp return and was getting conflicting advice from different sources. Your point about the double tax benefit makes perfect sense - we can't deduct the wages AND keep the credit without adjustment. Quick follow-up question: when you say "allocated the ERC reduction between different wage categories," did you base that allocation on the actual employees whose wages qualified for the ERC, or did you just split it proportionally across all wage categories? I have both officer wages and regular employee wages, but only some of the employees' wages actually qualified for the ERC periods.
This is so frustrating! I had the same issue - filed on 1/22 and never saw any advance option. Really wish TurboTax would be upfront about when these programs end instead of leaving us guessing. At least now I know for next year to file literally the first day possible if I want that advance. Thanks for posting this question - glad I'm not the only one who missed out!
This happened to me too! Filed on 1/26 and was so confused when there was no advance option anywhere. Really wish they would put a clear notice on their website about when the advance program ends each year. It's frustrating to find out after the fact that you missed the cutoff by just a few days. At least we're all in the same boat though - sounds like a lot of people ran into this issue this season!
Ugh yes! I filed on 1/28 and had the exact same experience - kept looking for the advance option and it was just nowhere to be found. Super annoying that they don't give any heads up about when it ends. At least now I know I wasn't doing anything wrong! Definitely setting a reminder for next January to file ASAP if I need that advance money.
Pro tip: Keep checking your transcript every Tuesday and Friday morning. Thats when they usually update the system
Just went through this exact same situation last year. Filed my amendment in August and the "Where's My Amended Return" tool showed that same "currently unavailable" message until January. What really helped me was setting up alerts on my IRS account to get notified when anything changed on my transcript. Also, if you have a local Taxpayer Advocate Service office, they can sometimes help if you're past the 16-week mark and experiencing hardship. The wait is brutal but hang in there - it will eventually get processed!
Logan Stewart
Has anyone used the "qualifying relative" designation rather than "qualifying child" for an adult disabled sibling? I'm in a similar situation but my brother is 42 and permanently disabled from a work accident. Not a veteran but gets SSDI. The IRS publication is so confusing about which category to use.
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Mikayla Brown
β’Yes, you'd use "qualifying relative" for an adult sibling. The "qualifying child" category has an age limit (generally under 19, or under 24 if a student) unless they're permanently and totally disabled. But even with the disability exception, "qualifying child" is primarily for your own children, stepchildren, foster children, siblings, or descendants of any of these. For an adult brother, "qualifying relative" is the right category, and the requirements are: 1) they don't have to be related if they live with you all year, but siblings qualify regardless, 2) their gross taxable income must be less than $4,400 (for 2023), 3) you provide more than half their support, and 4) they're not filing a joint return except to claim a refund.
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Henrietta Beasley
Isaac, based on your detailed description, you should definitely be able to claim your brother as a qualifying relative dependent. The key points working in your favor: 1) **VA disability and SSDI don't count toward gross income test** - These tax-exempt benefits won't disqualify him from dependency status, regardless of the monthly amount. 2) **Support test calculation** - When calculating the 50% support test, include the fair rental value of his housing in your home, utilities, food, transportation, medical expenses not covered by insurance, and other living costs. Your brother's disability payments only count as "support he provides for himself" if he actually uses them for support expenses. 3) **Your caretaker role strengthens your case** - The fact that the VA officially designated you as his caretaker and recognizes his need for full-time care due to cognitive impairment from TBI supports the dependency relationship. 4) **Potential additional benefits** - As his caretaker, you may qualify for Head of Household filing status (if unmarried) and potentially the Credit for Other Dependents. Given his cognitive impairment and your role as his VA-designated caretaker, this seems like a clear-cut case for claiming him as a dependent. The IRS recognizes that disabled individuals may receive significant non-taxable benefits while still being legitimately dependent on others for support.
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Ravi Sharma
β’This is really helpful information! I'm new to dealing with dependent situations involving disability benefits. One question - you mentioned the Credit for Other Dependents. How does that work exactly? Is it different from the Child Tax Credit, and what's the dollar amount? Also, since Isaac mentioned his brother spends the disability money impulsively due to brain injury, would that actually help with the support test calculation? Like if the brother isn't using those funds for legitimate support expenses, do they still count as "support he provides for himself"?
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