Thanks for this advice! Did you end up having to pay any penalties or just return the funds?

I caught mine and corrected it within the same tax year, so I just had to return the funds to my HSA account. No penalties or taxes since I fixed it before filing. Since some of your charges go back to last year, you might have a different situation. If you already filed taxes claiming those as qualified expenses, you'll likely need to file an amended return and potentially pay the 20% penalty on those specific amounts.

This is actually incorrect information. The type of provider (psychiatrist vs therapist) doesn't automatically make the expense qualified. What matters is whether the service is for medical care as defined by the IRS. Mental health treatment IS covered, but general wellness counseling is not considered "medical care" regardless of who provides it.

A second vote for FreeTaxUSA! That's encouraging. Have you ever had to amend a return with them? That's one thing I occasionally need to do when I receive a corrected 1099 from my brokerage after filing.

Yes, I actually did have to file an amended return last year when I received a late K-1 form after filing. The amendment process was very straightforward with FreeTaxUSA. They walked me through exactly what had changed from my original return and helped me complete the amended forms correctly. What I especially liked was that they didn't charge an additional fee for the amendment like TurboTax used to do to me. The whole process took about 30 minutes and was much less painful than I expected. They also kept good records of both the original and amended returns so I could see exactly what changed.

Did TaxSlayer handle partial-year residency well? I'm moving to another state next month for a new job and dreading next year's taxes. Last time I moved between states I used H&R Block in person because I was too intimidated to try it myself.

TaxSlayer handled the partial-year residency surprisingly well. It walks you through each state separately and asks specific questions about when you moved, your income earned in each state, and taxes already withheld. It then correctly apportioned my income between the two states based on my residency dates. The system also caught that I had paid too much tax to my previous state through withholding and calculated the refund correctly. For the new state, it properly applied their part-year resident rules. The whole process was much less intimidating than I expected, and I'd definitely recommend it over paying the high fees at H&R Block in-person.

How are you documenting your involvement though? Do you keep some kind of log or calendar of activities? I'm worried about getting audited and not having enough proof to back up my claim.

I keep a simple spreadsheet where I note dates of significant rental activities - when I review monthly statements, communications with the property manager, decisions about maintenance, research on market rates, etc. I don't obsess over logging every minute, but I make sure to document substantial business activities. I also save all emails with my property manager, maintain a separate business bank account, and keep good financial records. This creates a natural documentation trail showing I'm treating the rental as a business, not just a passive investment. The key is demonstrating regular, continuous involvement with a clear profit motive - not necessarily hitting a specific hour threshold.

That's a really good point about the income thresholds. Does anyone know if rental losses that carry forward affect this calculation? OP mentioned they have QBI losses accumulating - would that impact their ability to take the deduction in future years when the property becomes profitable?

How many years can you show losses before the IRS considers your business a hobby though? I heard they get suspicious if you're always operating at a loss.

The IRS generally expects you to show a profit in at least 3 of the last 5 tax years to be considered a legitimate business rather than a hobby. If you consistently show losses year after year, that's when they might question whether you have a profit motive. However, for a new business like yours, it's completely normal to have losses or very small profits in the beginning years. They understand businesses take time to become profitable. Just make sure you're operating in a businesslike manner - keep good records, have a separate business bank account, and be working toward profitability.

I've used TurboTax Self-Employed for my small Etsy shop and it works fine, but honestly it's overkill if you just have a few transactions. You might be better off with FreeTaxUSA which is a lot cheaper and handles Schedule C just fine for simple situations.

Is the attorney-client privilege only for criminal tax issues or does it apply to civil tax problems too? I'm dealing with some back taxes but nothing criminal.

Attorney-client privilege applies to both civil and criminal tax matters. Even in civil tax disputes, the privilege protects your communications with your attorney from being disclosed. This can be particularly important if you're discussing strategies, weaknesses in your position, or settlement options with your attorney. With a CPA, those conversations could potentially be discoverable by the IRS in certain situations.

Isn't that super expensive to have both? I'm trying to figure out which one I need without breaking the bank.