One thing nobody's mentioned - depending on what state you live in, you might also need to set aside money for STATE taxes on that lump sum too! Federal isn't the only thing to worry about.

Michigan has a flat state income tax rate of 4.25%, so you'll want to set aside an additional $1,530 (4.25% of $36,000) on top of whatever you're saving for federal taxes. So if you're setting aside 25-30% for federal, you're looking at roughly 29-34% total when you include state taxes. The good news is Michigan's tax is pretty straightforward - it's just a flat rate on all income, so no complicated bracket calculations like with federal. But definitely don't forget about it! I've seen people get caught off guard by state taxes on large one-time payments because they only planned for federal. You might also want to check if Michigan requires estimated tax payments for large income increases. I'm not 100% sure on their specific rules, but it's worth looking into to avoid any penalties.

Just want to add that if your first abatement request is denied (which happens sometimes), don't give up! You can appeal the decision. When I got hit with a 5500EZ penalty, my first request was denied with a form letter. I called the IRS, got the name of a specific person to send my appeal to, and rewrote my letter with more specific details. The second time worked, and they removed the entire penalty. Just be persistent and keep good records of all your communications. And definitely use certified mail for everything you send them!

I'm sorry for your loss, Lucas. Losing a parent is incredibly difficult, and it's completely understandable that handling paperwork wasn't your priority during that time. Based on what you've described, you have a strong case for penalty abatement. The death of a close family member is one of the most well-recognized reasonable cause exceptions the IRS accepts. I'd recommend structuring your letter chronologically: explain that your father passed away in June, that you received the Form 5500EZ in late July while dealing with grief and estate matters, and that you mailed it from Canada where international postal delays are common. Keep the tone professional but don't hesitate to briefly explain how your father's passing affected your ability to handle financial matters promptly. The IRS agents reviewing these cases are human too, and they understand that major life events can disrupt normal routines. Since this was your first time filing Form 5500EZ and you have a clean compliance history, make sure to emphasize that in your letter as well. The combination of reasonable cause (family death) plus your good standing should work in your favor. Send everything certified mail with return receipt requested, and keep copies of everything. Good luck with your request!

I own 12 rental properties and have 3 vehicles in my real estate business. Here's what I've learned after making this mistake before: Insurance costs were about 30% higher for my LLC-owned truck vs my personally owned one. Some insurance companies flat out wouldn't cover an LLC vehicle without a commercial policy. BUT - liability protection is significantly better with LLC ownership. A few years ago, one of my contractors got in an accident with my personally-owned truck (even though I had proper business insurance). It created a legal nightmare that wouldn't have happened with LLC ownership. If your state allows it, consider creating a separate LLC just for your vehicles. That's what I do now - one LLC for properties, one for vehicles/equipment. Keeps liability contained if something goes wrong.

For what it's worth, I spent 3 years as an insurance adjuster for commercial vehicles. Many real estate investors don't realize that if you purchase a vehicle personally but use it 100% for business, your personal insurance might deny claims if they discover it's primarily used for business purposes. I've seen multiple claims denied because people tried to save money on premiums by getting personal coverage when they should have had commercial. Then when an accident happened, the insurance investigation revealed business use, and they ended up with zero coverage. If you're truly using it 100% for business, be upfront with your insurance company about that regardless of how you title the vehicle. Most companies offer business use riders for personal policies that cost less than full commercial coverage.

Since you're not planning to rent it out, have you considered a 1031 exchange? It lets you defer capital gains taxes if you're buying another investment property. But there are strict timelines - you need to identify the new property within 45 days and complete the purchase within 180 days.

Just wanted to add a practical tip that saved me thousands when I sold my gifted property last year - make sure you get a proper appraisal done before you sell, not just a CMA (Comparative Market Analysis) from a realtor. The IRS may challenge your sale price if it seems too low compared to fair market value, especially with gifted properties since they're more scrutinized. I paid $500 for a certified appraisal and it gave me solid documentation that my sale price was legitimate. Also, regarding your question about using only part of the proceeds - this is actually a smart move in many cases. If you can get a mortgage rate that's lower than what you could earn investing the rest of the money, it makes financial sense. Plus, mortgage interest is tax-deductible while investment gains from the proceeds would be taxed as capital gains. One more thing - start gathering documentation NOW about what your brother originally paid for the house and any improvements he made. The longer you wait, the harder it becomes to track down those records, and that's money you could be leaving on the table.

Just an FYI - I think the threshold for reporting is actually still $20,000 AND 200 transactions for 2023 taxes (filing in 2024). The $600 threshold was supposed to start in 2022 but got delayed.

I went through this exact same panic last year! The key thing that helped me was realizing that even if you do get a 1099-K form, it doesn't automatically mean you owe taxes on that amount. The form is just reporting gross payment volume - it's basically saying "this person received X dollars through our platform" without any context about whether it was income or not. If all your Venmo transactions were truly personal (roommate paying you back for rent, friends reimbursing you for concert tickets you bought for the group, etc.), then you had $0 in actual taxable income from the app, regardless of what any 1099-K might say. You'd just need to be able to explain that if questioned. The IRS isn't going to waste resources auditing people over legitimate personal transfers. They're looking for people who are actually earning unreported business income through these platforms. Keep your Venmo descriptions clear (like "utilities reimbursement" or "dinner split") and you'll be fine.