How are you guys handling the furniture and stuff in your short term rentals? Do you just buy everything outright or do some kind of furniture rental? I'm trying to figure out the most tax-efficient way to furnish my basement apartment rental.

Thanks for sharing all this helpful information everyone! I'm still wrapping my head around the personal use tracking requirements. One question I have - when you're calculating the percentage split between rental and personal use, do you base it on total days in the year or just the days when the space was actually occupied (either by renters or yourself)? For example, if my basement was rented for 100 days, I used it personally for 20 days, and it sat vacant for 245 days, do I calculate personal use as 20/365 days or 20/120 occupied days? This seems like it would make a huge difference in how expenses get allocated! Also, has anyone dealt with the situation where you have overnight guests (family/friends) staying in the rental space for free? I'm assuming those count as personal use days even though I'm not the one sleeping there?

Something similar happened to my brother and he found out the fraudster was actually his roommate who had accessed his tax documents from mail he'd left on the kitchen counter! Might be worth thinking about who had access to your personal info recently. Could be someone closer than you think.

This is such a frustrating situation, and I feel for you! I went through something similar two years ago. A few additional tips that helped me: 1. Keep detailed records of EVERYTHING - dates, times, confirmation numbers, who you spoke with. This becomes crucial if there are any delays or complications. 2. Consider requesting a tax transcript once your case is resolved to see exactly what the fraudulent return looked like. It might give you clues about where your info was compromised. 3. Don't forget to check if the fraudster also filed a state return - many people focus only on federal but miss that their state refund might also be tied up. 4. If you have direct deposit set up, make sure those bank account details are still secure. Sometimes fraudsters will try to change banking info for future refunds. The silver lining is that once you get through this mess, having an IP PIN actually makes tax filing more secure going forward. I now get my new PIN in December and file as early as possible in January. Haven't had issues since then. Hang in there - it will get resolved!

Does anyone know if this affects Form 5329? I removed excess contributions like OP, got a 1099-R with code 8J, but my tax software is still prompting me to fill out Form 5329 and showing a 6% penalty. Shouldn't this form be unnecessary if I corrected the excess before the deadline?

I went through almost the exact same situation last year! Made an excess Roth contribution, caught it during tax prep, and had my brokerage remove it before the filing deadline. Just to confirm what others have said - you should see code 8J on your 1099-R since you removed the excess in the same year before the tax deadline. The "8" indicates excess contribution removal, and the "J" modifier accounts for the adjustment (loss in your case). One tip: when you get your 1099-R, double-check that the distribution amount matches what your brokerage told you they removed. Mine was slightly different due to market fluctuations between when I requested the removal and when it was processed. Also keep all your documentation showing the removal was requested and completed before the tax deadline - it's good backup if the IRS has any questions. The good news is no penalties and no amended return needed since you caught it in time!

H&R Block offers an Peace of Mind® guarantee that covers penalties and interest if they make a mistake. Call them ASAP and explain the situation. But it sounds like they didn't make an error if you forgot to tell them about stock sales - that wouldn't be covered. You might still qualify for their Audit Support though, where they'll explain the notice and help you respond. Worth checking what your service package included!

Anna, glad you figured out what caused the discrepancy! Unreported stock sales are actually one of the most common reasons people get CP14 notices. The IRS automatically matches 1099-B forms from brokerages against tax returns, so they catch these pretty quickly. Since you've identified the issue and are setting up a payment plan, make sure to file an amended return (Form 1040X) to properly report the capital gains. This will show the IRS you're taking responsibility for the error. If you held the stocks for more than a year, you might qualify for lower long-term capital gains rates which could reduce what you owe. Also, keep detailed records of this whole process - if you ever face a similar situation in the future, having documentation of how you resolved it properly will be helpful. It's a stressful lesson but you're handling it the right way!

Just to add something no one's mentioned yet - sometimes massive tax refunds happen because of amended returns for multiple years. My colleague discovered he qualified for the Foreign Earned Income Exclusion for the 3 years he worked overseas, which he hadn't claimed originally. He filed amended returns for all three years and got a combined refund of about $32k. So your cousin might have had some kind of multi-year correction situation rather than just a single year huge refund. It's worth asking her if she filed any amendments or had refunds from previous years finally process.

From my experience as a small business owner, there are situations where you might get an unusually large refund. Last year, I estimated my quarterly tax payments based on the previous year's income, but then had a significant business loss in Q4. I had already paid in about $22k in estimated taxes throughout the year but ended up owing much less due to the business loss, resulting in a large refund. Another possibility: if your cousin bought a house last year, there are substantial first-time homebuyer credits in some states that can be combined with federal credits, especially for energy-efficient improvements. These can add up quickly.