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I'm having exact same problem!!! Last month I sold my grandmother's old china set for $700 that was probably worth thousands when new but I don't have a receipt from the 1970s lol. Also sold some designer clothes I impulse bought and never wore but took a big loss on them. How do u even figure the cost basis on inherited items like that china? Its so confusing and I'm scared PayPal will send a 1099K even though I'm nowhere near the threshold and then the IRS will think I'm running a business or something which I'm definitely not!!!
For inherited items like your grandmother's china, you can use what's called "fair market value" at the time you inherited them. You don't need the original receipt from the 1970s. You can research similar vintage china sets on sites like eBay or antique sites to establish a reasonable value. For the designer clothes, you can use credit card statements, email confirmations, or even screenshots of the current retail price of similar new items to establish that you sold them at a loss. The key is making a good faith effort to document these were personal items sold at a loss. Even without perfect documentation, creating this kind of reasonable basis for your claims is typically sufficient for the IRS.
@Jordan Walker, I completely understand your stress about this! I went through something very similar last year and want to share what I learned that might help ease your worries. First, the good news: you're thinking about this correctly. The IRS distinguishes between personal items sold at a loss versus actual business income, and you won't owe taxes on selling your personal belongings for less than you paid. Here's what I did when I was in your exact situation: 1. Created a simple spreadsheet with columns for: Item Description, Approximate Purchase Date, Estimated Original Cost, Sale Price, and Notes 2. For items without receipts, I researched similar items online to estimate what I originally paid 3. Added notes like "personal designer bag purchased approximately 2019, selling due to financial need" The key insight that helped me: the IRS isn't trying to trap people selling personal items at yard sale prices. They're looking for patterns that suggest unreported business activity. Your situation - selling varied personal items at obvious losses - is clearly not a business. Regarding the thresholds, yes it's confusing! PayPal has been more aggressive with 1099-K reporting, but remember: receiving the form doesn't create a tax obligation. You'll just need to show these were non-taxable personal sales when you file. Don't let this keep you from selling items you need to sell! Just document what you can reasonably document, and you'll be fine.
11 Has anyone used a CPA or tax attorney to deal with this kind of situation? Wondering if it's worth the cost or if I'm better off handling it myself.
1 I used a tax attorney last year when I owed about $45k. Cost me $3500 but was 100% worth it. They reduced my total liability by finding mistakes in my original filings and negotiated a payment plan I could actually afford. They also kept the IRS from putting liens on my property.
I went through a similar situation a few years back - owed about $52k and was terrified of losing my retirement savings. Here's what I learned: You can't really "volunteer" for a levy, but you can definitely be proactive. The IRS would much rather work with you than seize assets. When they do levy retirement accounts, you avoid the 10% penalty but still owe income tax on the distribution. My advice: Call the IRS immediately (or use one of those callback services mentioned here - they actually work). Be honest about your situation and request a reinstatement of your installment agreement. They often approve modified terms, especially if you can make a good faith payment upfront. I ended up making a partial withdrawal from my 401k (took the penalty hit) to show good faith, then negotiated a manageable monthly payment for the rest. Yes, it hurt short-term, but it kept me in control of the situation rather than having them dictate terms. Don't wait for the levy - once collection enforcement starts, you have way fewer options and much less negotiating power.
This is really helpful advice, thanks for sharing your experience. The part about maintaining control versus having them dictate terms really resonates with me. How long did it take for them to approve your modified payment plan after you made the good faith payment? I'm trying to figure out my timeline here since I just got the breach notice.
Has anyone filed Form CT-3-S for NY? I have an S-Corp (not an LLC) in New York but live in Connecticut, and I'm totally confused about what I need to file where. The NY website is so complicated!
Yes, I have experience with CT-3-S. For S-Corps in NY with non-resident owners, you need to file both the CT-3-S at the entity level and then you personally need to file the IT-203 nonresident return to report your share of NY source income. It's more complicated than LLC pass-through taxation.
This is exactly the kind of multi-state tax complexity that trips up so many LLC owners! Based on your situation, here are the key points: Since you're a Colorado resident performing all work in Colorado, that's where you'll owe state income taxes on the LLC income - regardless of where the LLCs are registered. Colorado will tax you on your worldwide income as a resident. For Delaware: Good news! Delaware generally doesn't tax income from LLCs that don't have physical presence in the state. You'll just need to pay the annual franchise tax ($300) to maintain registration. For New York: This is trickier. If your NY LLC has any nexus to New York (clients there, meetings there, property there), you might need to file NY returns. Even if you don't owe NY tax because you're not a resident, you may still need to file informational returns. One thing to watch out for: Make sure you're not creating unintended nexus by having business bank accounts, registered offices with mail forwarding, or conducting any business activities in DE or NY. I'd recommend consulting with a multi-state tax professional to review your specific situation, especially given the complexity of nexus rules. Each state interprets "doing business" differently, and you want to avoid any compliance issues.
Based on the current processing timeline, I'd recommend your friend submit the requested documents by April 30th at the latest. If they do that, they could potentially see a new DDD by June 15th. Another option is to check if they can upload the documents through the IRS online account portal rather than mailing them - as of March 1st, 2024, the IRS expanded their digital document submission options for certain verification requests.
Just to clarify, per Internal Revenue Manual 21.5.6, taxpayers responding to these verification requests should retain proof of submission. The IRS allows 30 days from the date of the letter for response before taking adverse action, though extensions may be requested by calling the number on the notice.
As someone who's dealt with IRS verification requests before, I'd strongly suggest your friend respond ASAP with the requested documents. The key thing is that once the IRS flags a return for additional verification, any existing DDD gets canceled until they complete their review. For international students specifically, make sure to include a copy of your I-20 or DS-2019 along with the W2-G and 1099 forms - the IRS sometimes needs to verify your tax status. Also, send everything via certified mail so you have proof of delivery. The waiting is brutal, but being proactive with the documentation really helps speed things up!
This is super helpful advice! I'm actually in a similar boat as an international student and was wondering - when you mention including the I-20 or DS-2019, should we also include any documentation showing our tax treaty benefits? I know some countries have treaties that affect gambling winnings taxation. Also, has anyone had luck with the IRS online portal for uploading these docs, or is certified mail still the safest route?
Layla Mendes
Has anyone been able to use TurboTax to file an amended return for crypto losses? Their interface is confusing me when trying to enter all my transactions from 2021.
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Lucas Notre-Dame
ā¢I used H&R Block software instead of TurboTax for my amended crypto return. Found it much easier to work with for Form 8949 entries. You can import a CSV file with all your transactions which saves tons of time.
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Ava Martinez
I was in almost the exact same situation! Lost about $8k in crypto in 2021 and completely ignored it on my taxes because I was so frustrated. Finally bit the bullet and filed an amended return (Form 1040-X) last month. The process wasn't as bad as I expected. You definitely should report all crypto transactions even with zero gains - the IRS considers each trade a taxable event regardless of profit/loss. I gathered all my exchange statements, calculated my basis using FIFO method, and filed the amendment. Already got my refund for the $3k loss deduction against my 2021 income, and I can carry forward the remaining $5k to offset future gains or take another $3k deduction next year. Don't let the paperwork intimidate you - it's worth doing especially since you're still within the 3-year window to amend 2021.
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