Don't forget about the Secured Debt advantage too! If you record the loan against the property (like a second mortgage or deed of trust), it becomes secured debt which gives you stronger tax footing. I learned this lesson the hard way - had a private loan from my in-laws that wasn't recorded against the property. During an audit, the IRS questioned whether it was actually a gift disguised as a loan. Had to produce bank statements showing all the payments made over 3 years to prove it was legit. Now I always record private loans with the county even though it costs a few hundred dollars. The recording fee is worth the peace of mind and stronger tax position.

This is a great question that many real estate investors face! The key thing to understand is that the IRS cares more about the legitimate business purpose of the loan than who the lender is. As long as you're using the money specifically for your rental property investment, the interest should be deductible on Schedule E. A few critical points to keep in mind: 1. **Documentation is everything** - Create a formal written loan agreement that includes the principal amount, interest rate, payment schedule, and maturity date. This doesn't need to be overly complex, but it should look professional and be signed by both parties. 2. **Interest rate considerations** - The rate should be reasonable and at arm's length. You can reference the IRS Applicable Federal Rates (AFR) as a baseline. If the rate is significantly below market, the IRS might view part of it as a gift rather than a legitimate loan. 3. **Keep excellent records** - Track all payments made, maintain copies of checks/transfers, and ensure the lender reports the interest income on their tax return. You'll need to provide the lender's information when you file. 4. **Consider recording the loan** - While not required for deductibility, recording a deed of trust or mortgage with your county can provide additional legitimacy and protection for both parties. The fact that it's family doesn't disqualify the deduction - just make sure you treat it like any other business loan with proper documentation and regular payments according to your agreement.

Random thought, but have you checked the other pages of the 1099? Sometimes the payer info appears on a different page or in a strange spot depending on which tax software they used to generate it. I once found the missing EIN on the "taxpayer copy" page when it was missing from the main form. Worth double-checking before going through all these other steps!

This is a really concerning situation that unfortunately happens more often than it should. The hidden/blacked out TIN is definitely not normal and raises some red flags about the company's tax compliance practices. Here's what I'd recommend doing immediately: 1. **Document everything** - Take clear photos of the 1099-MISC showing the hidden TIN, save all your communication attempts (voicemails, emails, etc.) 2. **Send a formal written request** - Send them a certified letter requesting the correct TIN within 10 business days. This creates an official paper trail. 3. **Check all your records** - Look through any contracts, invoices, or payment documents from this company. The EIN might be listed somewhere else. 4. **File Form 4852** if needed - If you can't get the TIN by the filing deadline, use this substitute form and attach documentation of your good faith efforts to obtain the information. The fact that they're not responding to your calls is another red flag. Legitimate businesses should be responsive about tax document issues. Make sure you report all $11,250 as income regardless - the IRS cares more about you reporting the income correctly than having every detail perfect when the payer isn't cooperating. Don't let this delay your filing too much. You can always amend later if you eventually get the correct information.

Make sure you're tracking everything correctly if you go the real estate professional route. My sister claimed this status and got audited. The IRS was particularly interested in: 1. Evidence that she actually spent 750+ hours on real estate activities 2. Proof that she materially participated in each property 3. Documentation showing she spent more time on real estate than any other occupation They wanted to see phone logs, emails with tenants, receipts for supplies, mileage logs, appointment calendars, etc. The more detailed your records, the better. They rejected some of her hours because she couldn't prove them.

Based on your description, you have a strong case for qualifying as a real estate professional. Managing 2 properties completely on your own while actively expanding your portfolio definitely shows material participation. The key is going to be documenting those 750+ hours. Here's what I'd recommend starting immediately: **Start tracking NOW**: Even though it's already April, begin logging every minute you spend on real estate activities. Use a detailed spreadsheet or app that timestamps everything. **Reconstruct what you can**: Go back through 2024 and estimate time spent based on: - Text messages with tenants/contractors - Bank statements showing property-related purchases - Calendar appointments for showings/inspections - Mileage logs to properties **Include ALL qualifying activities**: - Tenant screening and communications - Property maintenance and repairs (including travel time) - Financial record-keeping and bookkeeping - Market research for new investments - Time spent on the pre-construction property purchase - Educational activities (real estate courses, seminars) **Document everything going forward**: Take photos of repairs, save all emails, keep receipts with notes about time spent. At your spouse's income level ($145k), the regular $25k rental loss allowance is almost completely phased out, so qualifying as a real estate professional would be huge for your tax situation. Just make sure your documentation is bulletproof!

Has anyone here used the IRS's Interactive Tax Assistant for this? I tried using it but got confused about what counts as "improvements" versus "repairs" when calculating my basis.

Great question! I went through this exact process last year when selling my home. One thing that really helped me was keeping a detailed spreadsheet of all improvements from day one of ownership. Even seemingly small things like a new water heater or upgraded electrical outlets can add up to significant basis adjustments. For your situation, you're actually in pretty good shape. With a $250k gain before any adjustments, you're right at the exclusion limit. But remember that the $12k HVAC and $8k buyer credit will reduce your gain further, and any documented improvements over the years will increase your basis. A few practical tips: Keep ALL receipts from improvements (take photos and store them digitally too). For the HVAC situation, since it's being paid at closing as part of the sale negotiation, it's definitely a selling expense that reduces your gain. Don't let your realtor talk you into creative commission arrangements - stick to legitimate, documented transactions. Also, consider having a tax professional review your calculation before filing. Home sales can get complex quickly, and the potential tax savings usually justify the cost of getting it right the first time.

Has anyone used a CPA with experience in identity theft cases? After reading all these comments, I'm still confused about whether to handle this myself or hire someone. I'm worried about making a mistake that could delay things even further.

I went through a very similar situation with my daughter's identity being stolen for tax purposes. One thing I learned that might help - when you call the IRS Identity Theft line at 800-908-4490, ask specifically for a "case trace" on your 2021 return. This will show you exactly what adjustments they made and why. For the dependent they incorrectly removed from your EIC calculation, you'll definitely need to file Form 1040X as others mentioned, but here's something important - include a cover letter that references your identity theft case number. This helps the IRS connect the two issues and can speed up processing. Regarding the Taxpayer Advocate Service (Form 911), absolutely do this ASAP. With $10K at stake and multiple years of back-and-forth, you clearly meet their criteria for "significant hardship." When filling out the form, be very specific about the financial impact this has had on your family. One more tip - if you do decide to hire professional help, look for an Enrolled Agent (EA) rather than just a regular tax preparer. EAs can represent you directly to the IRS and many specialize in complex cases like identity theft. They're often less expensive than CPAs but have the specialized knowledge you need. The interest calculation should apply to any additional refund amount from the original due date, so that's definitely something to pursue. Good luck - you're doing all the right things!