Quick tip for anyone dealing with this situation: if you're using tax filing software, look for an option specifically for addressing 1099-K income that's also reported on other forms. Most major tax programs now have this feature because this problem is so common with PayPal, Venmo, Cash App, etc. In TurboTax, there's a specific question asking if any 1099-K income was already reported elsewhere. H&R Block has something similar. Answer YES and it should guide you through properly documenting without double-counting. Saved me a ton of hassle last year!

Just wanted to share my experience as someone who went through this exact situation last year. I was getting both 1099-NEC and 1099-K forms for my freelance writing income and was completely panicked about double taxation. The key thing I learned is that this is actually a very common issue now with digital payment platforms. The IRS knows this happens and has procedures to handle it. What worked for me was reporting my actual income once on Schedule C, then keeping detailed records showing that both forms represent the same payments. I made a simple spreadsheet matching each client payment on my 1099-NEC to the corresponding transaction on my 1099-K. This way I could clearly demonstrate they were the same money if ever questioned. Also kept screenshots of my PayPal transactions and bank deposits to show the money flow. One thing I'd recommend is don't stress too much about this - it's becoming so common that tax software and even IRS systems are getting better at handling these situations. Just be thorough with your documentation and you'll be fine!

Have you considered requesting her personal tax return (Form 1040) along with the Schedule C? The Schedule C only shows the business profit/loss, but doesn't include any other income she might have. Maybe she has multiple income sources?

You're dealing with a classic discrepancy that happens all the time with small business owners. The Schedule C ($43,325 net profit) is what she actually reported to the IRS, while the HR Block P&L ($111,500 net profit) might be her internal bookkeeping before tax planning adjustments. Here's what I'd recommend: Focus on the Schedule C since that's her official tax filing, but also request her complete Form 1040 to see her total income from all sources. The $43,325 from Schedule C gets added to any other income she has (W-2 wages, investment income, etc.) to give you her total adjusted gross income. However, don't stop there. Many LLC owners legitimately maximize deductions to reduce taxes, which can make their "paper income" look much lower than their actual cash flow. Ask for 3-6 months of personal bank statements to see what she's actually taking out of the business for living expenses through owner draws or transfers. Also check if there's significant depreciation on the Schedule C - this is a non-cash expense that reduces taxable income but doesn't affect her ability to pay rent. Some landlords add back depreciation when evaluating cash flow capacity.

Just a heads up - when you get your new LLC EIN, don't forget to update it with ALL your payment processors (PayPal, Stripe, Square, etc) and any platforms where you sell your services. I forgot to update mine with one platform and it caused a huge mismatch when they issued my 1099-K. Took months to sort out with the IRS!

Just went through this exact same situation last month! One thing I learned that wasn't immediately obvious - when you apply for your new LLC EIN, make sure you have your LLC's Articles of Organization handy. The IRS online application will ask for specific details like your LLC's formation date and the state where it was formed. Also, don't stress too much about the timing. You can continue operating under your sole prop EIN while you're waiting for the new LLC EIN to come through, as long as you make the switch before filing your next tax return. Just keep good records of which income/expenses belong to which entity during any overlap period. The whole process is actually pretty straightforward once you get started - much less scary than it seems when you're reading about it online!

why do you even need a W2 from that long ago? just curious

Pro tip: If you filed your taxes electronically that year, your tax preparer might still have a copy of your W2. Worth a shot!

Another thing to watch out for - don't forget about depreciation! Even if you're filing jointly, you need to depreciate the portion of your home used for rental (the 40% in your case). This is a required deduction even if you don't want to take it (yes, weird but true). The basis for depreciation would be the lower of your purchase price or fair market value when you converted to rental use, multiplied by 40%. Then you depreciate that over 27.5 years.

Since you're filing jointly, I've found it easiest to just enter everything once and let the software handle it. No need to split anything manually between you and your spouse. The tricky part is tracking everything correctly for future years. Keep separate folders for receipts that are 100% rental (like repairs only in the tenant's area) vs. shared expenses that need to be prorated. It'll save you hours next tax season!