Has anyone compared how much of a difference it makes financially to file rentals on Schedule E vs Schedule C when you qualify as a real estate professional? My CPA has been putting our rentals on C for years but after reading this I'm wondering if we should switch.

This is such a common issue with real estate professionals who also have rental properties! I went through exactly the same thing a few years ago. The key insight that changed everything for me was understanding that being a real estate professional is about HOW your losses are treated, not WHERE they're reported. Your rental properties should definitely be on Schedule E - that's where rental income and expenses belong according to IRS guidelines. The real estate professional election just means those Schedule E losses become "active" rather than "passive," so you can deduct them against your W2 income without the usual passive activity loss limitations. Your realtor commissions, photography business, and crypto mining should each be on separate Schedule C forms since they're active business activities. This separation will help tremendously with lenders because they understand Schedule E depreciation as a non-cash expense, while Schedule C losses can look like actual business operating losses. One tip that really helped me with lenders: ask your CPA to prepare a "lender addendum" that explains the depreciation component of your Schedule E losses and shows your actual cash flow from the rentals. Most loan officers aren't tax experts and don't realize that rental depreciation is just a paper loss. Having this explanation attached to your tax returns can make a huge difference in getting approved. The 750+ hour requirement for real estate professional status applies to ALL your real estate activities combined (rental management, realtor work, etc.), so make sure you're tracking everything properly. Good luck with the refinancing!

Just to add one more perspective - I ran into this exact issue last year and ended up answering "No" on the EIN application regarding Form 720 after confirming my products didn't contain ODCs. I found that most modern furniture and consumer goods use alternative foaming agents that aren't subject to the excise tax. My suppliers were able to provide certification that their products don't use the regulated chemicals. If you're dropshipping common consumer items like household goods or typical furniture, chances are they're using newer, compliant materials. The excise tax mainly applies to specific industrial chemicals and older manufacturing processes.

This thread has been incredibly helpful - I was dealing with the same confusion about excise taxes for my dropshipping business. Based on all the advice here, I reached out to my AliExpress suppliers with the specific chemical names mentioned (CFCs, HCFCs, etc.) and was able to get confirmation that their foam products use modern, compliant foaming agents. For anyone still struggling with this, I'd recommend the multi-step approach: first ask suppliers for MSDS sheets or environmental compliance certificates, then if you're still unsure, consider using one of the services mentioned here to get professional clarification. The key insight from this discussion is that most consumer products today DON'T use the old chemicals that trigger excise tax requirements. Thanks especially to Sofia for the specific chemical names to ask about - that made all the difference in getting clear responses from my overseas suppliers!

Quick tip - if the amount they're saying you owe is small (like under $100), sometimes it's just easier to pay it even if you think they're wrong. Fighting it might cost more in time and stress than it's worth. I got a similar notice for $73 last year because of a dividend payment I supposedly didn't report. Spent hours trying to find the documentation and eventually just paid it to make the whole thing go away.

I completely understand the anxiety you're feeling - getting that first IRS letter is nerve-wracking! But you're handling this the right way by seeking advice and not ignoring it. A CP2000 is actually one of the less scary IRS notices you can receive. It's an automated matching notice, not an audit. The IRS computer system flagged a discrepancy between what you reported and what third parties (employers, banks, investment companies) reported about your income. Here's what I'd recommend: 1. Read the notice completely and identify exactly what income they think you missed 2. Gather all your 2023 tax documents (W-2s, 1099s, etc.) and compare them to what's listed in the notice 3. If you find the missing income, you can either agree and pay, or if you believe you reported it correctly, provide documentation showing where it appears on your return Don't feel bad about doing your own taxes with TurboTax - millions of people do this successfully. These discrepancies happen even with professional preparers sometimes. The key is responding within 30 days with the right documentation. You've got this! Take it step by step and don't let the official language intimidate you.

Don't forget about state taxes! If you worked in two different states like you mentioned, you'll probably need to file part-year resident returns for both states. This gets complicated fast when you have different income types.

I went through this exact situation last year! A few additional tips that helped me: 1. **Calculate your safe harbor amount** - If your prior year tax liability was under $1,000, you may not owe any estimated tax penalties at all. If it was higher, paying 100% of last year's tax liability (or 110% if your AGI was over $150k) through withholding + estimated payments will generally protect you from penalties. 2. **Consider Form 2210** - Even if you missed some quarterly payments, you might be able to avoid penalties by filing Form 2210 with your return and showing that your income was uneven throughout the year (which it sounds like it was, since you started the fellowship in June). 3. **Double-check your 1042-S reporting** - Fellowship income from a 1042-S typically goes on Schedule 1 as "other income" rather than being treated like regular wages. Make sure whatever tax software you use handles this correctly. 4. **Keep documentation** - Save all your fellowship award letters and any communication from your university about the tax treatment. Sometimes there are special provisions for certain types of research fellowships. The January 15th estimated payment is definitely worth making to avoid additional penalties, but don't stress too much about the earlier quarters - the penalties are usually manageable and there are often ways to reduce them when you file your actual return.

Does anyone know if this affects Form 5329? I removed excess contributions like OP, got a 1099-R with code 8J, but my tax software is still prompting me to fill out Form 5329 and showing a 6% penalty. Shouldn't this form be unnecessary if I corrected the excess before the deadline?

I went through almost the exact same situation last year! Made an excess Roth contribution, caught it during tax prep, and had my brokerage remove it before the filing deadline. Just to confirm what others have said - you should see code 8J on your 1099-R since you removed the excess in the same year before the tax deadline. The "8" indicates excess contribution removal, and the "J" modifier accounts for the adjustment (loss in your case). One tip: when you get your 1099-R, double-check that the distribution amount matches what your brokerage told you they removed. Mine was slightly different due to market fluctuations between when I requested the removal and when it was processed. Also keep all your documentation showing the removal was requested and completed before the tax deadline - it's good backup if the IRS has any questions. The good news is no penalties and no amended return needed since you caught it in time!