Has anyone used the "Safe Harbor" method for reporting this? My accountant mentioned it might be easier than trying to calculate everything precisely, especially since my renovation invoices weren't all perfectly organized.

This is a great question that many rental property owners face! Just to clarify a few key points that haven't been fully addressed: 1. **Timing matters**: Since you stopped renting the property in mid-2020 but didn't sell until 2021, you'll need to be careful about the "placed in service" vs "conversion" dates when calculating your depreciation recapture. 2. **Renovation costs**: All your renovation costs from 2020-2021 do increase your basis, even though the property wasn't being rented during that time. These are capital improvements that reduce your overall gain. 3. **Form 4797 is correct**: As others mentioned, you'll use Form 4797 even though you weren't actively renting in 2021. The property's rental history makes this the appropriate form. 4. **Don't forget state taxes**: While everyone's focused on federal treatment, make sure to check your state's rules for depreciation recapture - they don't always follow federal guidelines exactly. One thing I'd suggest is gathering all your depreciation schedules from 2019-2020 to ensure you're using the exact amount you actually claimed, not an estimate. The IRS has records of what you deducted, so accuracy here is crucial to avoid any discrepancies.

Has anyone used the "zero out retained earnings" approach with TurboTax for their final S-Corp return? My accountant mentioned this but didn't explain how to actually do it in the software.

I went through this exact same situation when closing my S-Corp earlier this year. The balance sheet errors in TurboTax are usually caused by not properly accounting for where your cash went when you distributed it to yourself. Here's what worked for me: In TurboTax, you need to record that $4,200 as a "Distribution to Shareholders" under the equity section, not as an expense. This creates the proper offsetting entry that balances your books - cash goes down by $4,200, and shareholder equity (retained earnings) also goes down by $4,200. For the disposed assets, since you mentioned they were old equipment, make sure you're removing both the original cost AND the accumulated depreciation from your books. If they were fully depreciated, this should net to zero impact. One thing that caught me off guard - make sure your final balance sheet shows zero equity at year-end if you're completely liquidating. All retained earnings need to be distributed out to shareholders for the books to properly reflect a dissolved corporation. The IRS has specific requirements for S-Corp dissolution, so double-check that you're filing Form 966 in addition to your final 1120-S return. Good luck with the closure!

Has anyone else noticed that HR Block software doesn't group wash sales properly? Last year I had similar issues and switched to TurboTax, which actually combined my wash sales into summary transactions correctly. Saved me about 100 pages on my return. Might be too late for OP this year but worth knowing for next time. Also, getting an ITIN for your spouse will solve the paper filing issue in future years too. The form is W-7 and you can submit it with your return.

I'm dealing with a very similar situation right now! Also married to a non-resident alien and having to file MFS with paper returns. The wash sale rules are definitely making everything more complicated than it needs to be. One thing I learned from my tax preparer is that you can actually request an extension (Form 4868) to buy yourself more time to figure out the best approach. This might give you breathing room to explore some of the summary options people mentioned here, or even get that ITIN application started for your spouse. Also, regarding the wash sales specifically - if you're showing a net loss anyway, you might want to double-check that HR Block is calculating the wash sale adjustments correctly. Sometimes the software can be overly aggressive in flagging transactions as wash sales when they might not technically qualify under the 30-day rule. Have you considered consulting with a tax professional who specializes in international tax situations? They might have experience with creative solutions for these exact circumstances that could save you from printing a novella!

better safe than sorry - put that refund money aside until you know for sure whats going on

This happened to me too! My transcript showed $0 but I kept getting notices. Turns out there was a penalty assessment that hadn't updated on the transcript yet. I'd definitely recommend getting a tax professional to help sort this out, or try one of those transcript analysis tools people are mentioning. Don't ignore it though - they can definitely offset your refund even if the transcript looks clean right now. Better to deal with it upfront than lose your refund later!

Has anyone used the IRS withholding calculator for this? I tried but it seems more designed for W-2 income than retirement accounts. Is there a better calculator specifically for retirees with IRA distributions?

Brady, congratulations on reaching retirement! This is such an important question and you're smart to think about it upfront. I went through this exact same situation about 2 years ago when I started my IRA withdrawals. The 10% default is rarely the right amount for most people. What really matters is your total tax picture - not just the IRA withdrawal itself. You'll want to consider: 1. Your other retirement income (Social Security, pensions, part-time work) 2. Your filing status and standard deduction 3. Any other taxable income or capital gains 4. Your state's tax treatment of retirement income I ended up needing to withhold 20% because I had Social Security and some rental income that pushed me into a higher bracket than I expected. The key is to think about your total annual income, not just the IRA portion. One practical tip: Start conservative your first year. You can always adjust the withholding percentage for future distributions based on how your first tax season goes. It's better to get a refund than owe penalties for underpayment. Have you calculated what your total retirement income will be for the year? That's really the starting point for figuring out the right withholding rate.