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Just wanted to share some good news - I was in almost exactly your situation last Tuesday. SBTPG said it was sent, Chime said "tomorrow," but then I actually got it around 9pm that same night! Seems like Chime sometimes underpromises and overdelivers. Hope you see yours pop up tonight!
This is such a common frustration with SBTPG and Chime! I went through the exact same thing last month. SBTPG told me my refund was "sent" but Chime wouldn't release it for 24 hours. What I learned is that even though Chime advertises early direct deposit, they're more conservative with tax refunds that come through third-party processors like SBTPG. The ACH network still has standard processing times, and Chime waits for full settlement before releasing funds from these processors. It's annoying when you're expecting that "early" deposit benefit, but at least you know it's actually on its way now!
I'm dealing with a similar situation and this thread has been incredibly helpful! I owned my home for 15 years, lived in it for the first 10 years, then rented it out for 3 years when I moved for work, and finally moved back in for the last 2 years before selling. Based on all the information shared here, especially the specific tax code reference in Section 121(b)(5)(C)(ii)(I), it sounds like my 3-year rental period wouldn't count as non-qualified use since I lived there first. This is such a relief because I was worried I'd have to pay capital gains on a portion of my $180,000 gain. The explanations about how this exception exists specifically for people who relocate for work or other reasons really makes sense. It's good to know the IRS recognizes that homeowners sometimes need flexibility without losing their tax benefits. Has anyone here actually filed their taxes using this interpretation and had it accepted without issues? I want to make sure I'm not missing anything before I finalize my return.
Yes, I filed my taxes using this exact interpretation last year and it went through without any issues! My situation was very similar to yours - I owned my home for 14 years, lived in it for 8 years initially, rented it out for 4 years when I relocated for a job opportunity, then moved back in for the final 2 years before selling. I was initially nervous about claiming the full exclusion because my tax software kept flagging potential non-qualified use issues. But after researching the specific tax code section that others mentioned here (121(b)(5)(C)(ii)(I)) and consulting with a tax professional who specialized in real estate transactions, I felt confident that the rental period didn't count as non-qualified use since I had lived there first. Filed my return in February last year, got my refund processed normally, and haven't heard anything from the IRS since. The key thing that gave me confidence was having the actual tax code language to reference, plus multiple confirmations from different sources about how this exception works for people who relocate temporarily. Your situation sounds textbook for this exception - you lived there first, rented it out for work reasons, then moved back in before selling. As long as you meet the 2-out-of-5 year ownership and use tests (which you clearly do), your entire $180,000 gain should qualify for the exclusion.
This is exactly the kind of situation where the non-qualified use rules trip people up, but you're actually in good shape! Based on your timeline, you should qualify for the full $250,000 exclusion on your $119,000 gain. The key is understanding that "non-qualified use" has a specific exception for periods that occur AFTER you've already used the home as your principal residence. Since you lived in your Chicago house from 2010-2018 before renting it out from 2018-2020, that rental period falls under this exception and doesn't count as non-qualified use. Think of it this way: the IRS created this exception specifically for situations like yours where homeowners need to relocate temporarily (for work, family, etc.) but aren't ready to sell immediately. They don't want to penalize genuine homeowners who rent out their property as a bridge solution. Your timeline shows: - 12+ years total ownership ā - 10 years total residence use ā - 2+ years residence use in the last 5 years before sale ā - Rental period that doesn't count as non-qualified use ā You meet all the requirements for the full exclusion. Your entire $119,000 gain should be tax-free. Just make sure you have good records of your occupancy dates in case the IRS ever asks for documentation.
Thank you for breaking this down so clearly! As someone new to understanding these tax rules, this explanation really helps me grasp why the IRS created this exception. The way you laid out the checkmarks makes it easy to see how all the requirements are met. I'm curious though - when you mention keeping "good records of your occupancy dates," what specific documentation would be most helpful? Things like utility bills, voter registration changes, driver's license updates? I want to make sure I'm prepared if the IRS ever requests proof of the timeline. Also, does this same logic apply if someone has multiple rental periods separated by periods of personal use, or does it get more complicated in those scenarios?
Just wondering - has anyone used those "tax relief" companies that advertise on radio/TV for situations like this? They claim they can settle with the IRS for "pennies on the dollar" but I'm not sure if they're legit or scams.
I've been through almost the exact same situation - 6 years of unfiled returns after getting overwhelmed by an initial IRS notice. The anxiety was paralyzing, but dealing with it was actually much less scary than I had built up in my head. Here's what worked for me: I started by requesting my wage and income transcripts online from the IRS website. This showed me exactly what employers had reported each year, so I didn't have to track down old W2s. Then I filed all the missing returns at once using tax software (TurboTax actually handles prior years pretty well). The biggest shock? I actually got refunds for 3 of those years because I had overpaid through withholdings. The refunds almost completely offset what I owed for the other years. Don't let the anxiety keep you frozen - the IRS genuinely wants to work with people who are trying to get compliant. You've been having taxes withheld this whole time, which shows good faith. Start with getting those transcripts and you'll have a much clearer picture of where you actually stand financially. You might be pleasantly surprised.
You mentioned a company car - was that during your contract work or only after becoming an employee? If you had it during contract work, there might be tax implications there too.
It was only after becoming an employee. During the contract period, I was using my personal vehicle but the company reimbursed me for mileage. I'm guessing those reimbursements aren't taxable since they were just covering my costs?
If the company properly reimbursed you at or below the standard mileage rate (65.5 cents per mile for 2023), then those reimbursements aren't taxable income. However, you also can't deduct those miles since you've already been compensated for them. But definitely double-check if they reported those reimbursements as income on your 1099-NEC. Sometimes companies incorrectly include reimbursements, and if that happened, you'd want to deduct those expenses to offset that income.
I went through something very similar last year - owing a big chunk because of mixed W-2 and 1099 income. The self-employment tax on that $13,500 is probably what's killing you the most. A few things that helped me: 1. Double-check if your employer reimbursements were incorrectly included in your 1099-NEC income 2. Even small business expenses add up - phone usage, internet, any equipment or supplies 3. Set up quarterly estimated payments for next year to avoid this mess again The underpayment penalty stings, but at least it's relatively small compared to your total bill. I'd definitely recommend seeing a tax pro - they often find deductions that save more than their fee costs. Don't beat yourself up too much, this is a super common situation when transitioning from contract to employee work.
Noah Ali
I work for a tax resolution firm and see this "erroneous death marker" issue several times a year. Here's what I tell my clients: The fastest resolution path is actually through the IRS Taxpayer Advocate Service (TAS) that Sean mentioned, especially since you have a time-sensitive mortgage closing. Call 1-877-777-4778 and explain that the incorrect death status is creating financial hardship. They can issue a Taxpayer Assistance Order which essentially forces the IRS to prioritize your case. While waiting for TAS to act, simultaneously visit Social Security in person with multiple forms of ID - driver's license, passport, birth certificate if you have it. The SSA death file is often the original source of these errors. For your immediate tax filing needs, you'll have to paper file with a cover letter explaining the situation. Include copies (not originals) of your ID and any correspondence you've received about this issue. Pro tip: When dealing with the mortgage company, get a letter from your tax preparer or CPA confirming that you've filed returns in recent years. This can help demonstrate to underwriters that the death record is clearly erroneous while you're waiting for the government to fix their mistake. Good luck with your closing!
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Aria Park
ā¢This is incredibly helpful advice! I'm new to this community and dealing with my own tax nightmare right now. Quick question - when you mention getting a letter from a tax preparer, does that work if I've been doing my own taxes through software like TurboTax? I don't have a CPA or professional preparer. Also, how long does it typically take for the Taxpayer Advocate Service to respond once you call them? My situation isn't quite as urgent as OP's house closing, but I'm still stressed about getting this resolved before any penalties kick in.
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Malik Johnson
ā¢Great question! If you've been self-preparing through TurboTax or similar software, you can actually print out your tax return transcripts from the IRS website (irs.gov) going back several years. These official transcripts serve the same purpose as a CPA letter - they show a documented history of you filing returns while alive. You might also ask your bank for account statements showing regular activity, or get a letter from your employer confirming current employment. For TAS response time, they're required to acknowledge your case within 7 days and provide an initial response within 30 days. However, for "economic hardship" cases (which incorrect death status usually qualifies as), they often act much faster. In my experience, if you clearly explain the urgency and potential financial consequences, they'll often make initial contact within 3-5 business days. Don't worry too much about penalties - if you can show the IRS error prevented timely filing, they typically waive failure-to-file penalties. The key is documenting your attempts to resolve the issue. Keep records of every call, visit, and letter you send.
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Nia Davis
I went through something very similar about 8 months ago! The IRS had me marked as deceased due to what they called a "database synchronization error" with Social Security. Here's what worked for me: First, don't panic about your mortgage closing - I was in the exact same boat and it worked out fine. Contact your loan officer immediately and explain the situation. Most lenders have dealt with this before and can usually work with you as long as you show you're actively resolving it. The absolute fastest route is calling the Taxpayer Advocate Service at 1-877-777-4778 first thing in the morning. Tell them about your home closing timeline - they prioritize cases with financial hardship. I got a callback within 48 hours and they issued an expedited correction order. While waiting for TAS, visit Social Security in person (not online, not by phone - IN PERSON). Bring your driver's license, passport if you have one, and a recent bank statement. They can often update their records same-day, which then flows to the IRS within a few days. For your taxes, you'll need to paper file this year with a cover letter. I included copies of my ID, a letter from my employer, and even a utility bill to prove I was obviously alive and active. The whole mess took about 3 weeks to fully resolve, but the mortgage company was understanding once I showed them the documentation that I was actively fixing it. Hang in there!
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Avery Davis
ā¢Thank you so much for sharing your experience! It's really reassuring to hear from someone who went through the exact same situation and came out the other side successfully. The timeline of 3 weeks gives me hope - I was imagining this could drag on for months. I'm definitely going to call the Taxpayer Advocate Service first thing tomorrow morning and emphasize the mortgage closing deadline. Quick question - when you visited Social Security in person, did you need to make an appointment or could you just walk in? Also, did your lender require any specific documentation from you beyond just showing that you were working on resolving it? I'm meeting with my loan officer later this week and want to be prepared with everything they might need.
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