I've gone through the partnership agreement a few times now, and while there are extensive provisions about tax distributions and clawbacks, there's nothing specifically addressing the tax treatment when someone leaves before vesting. The agreement basically just says I have to return all tax distributions related to unvested carry, which I did. Would the absence of specific tax remediation language make IRC 1341 the default approach?

Yes, if there's no specific remediation mechanism in the partnership agreement, then IRC 1341 would be the appropriate default approach. That's actually quite common - many partnership agreements focus on the economic mechanics of clawbacks but don't address the tax consequences for the individual partner. In this case, you recognized income in 2022, paid tax on it, and then in 2024 you had to return the related distributions because you no longer had a right to that income. That's precisely what the claim of right doctrine is designed to address. Just make sure you have solid documentation of both the original income recognition and the repayment.

You could adjust your 2024 withholding or estimated tax payments to account for the expected IRC 1341 credit. That way you get the cash flow benefit sooner rather than waiting for the 2024 return to be filed in 2025.

Interesting point about the LLC. Is it something I can set up quickly? This job is starting in about two weeks, so I'm not sure if there's enough time. And would I need to get insurance too if I form an LLC?

You can usually set up an LLC in just a few days in most states. Many states have online filing systems now where you complete everything electronically. Once approved, you immediately get your filing documents, then you can apply for an EIN online with the IRS and get it instantly. Yes, you absolutely should get insurance regardless of whether you form an LLC or not. At minimum, you need general liability insurance for a construction project. The LLC helps protect your personal assets, but insurance is what covers actual claims. Many general contractors won't even let you on the jobsite without proof of insurance, so check if that's required in your contract.

I switched to FreeTaxUSA last year after having issues with TurboTax. Way cheaper and handled my Schedule C and all my 1099 income perfectly. Their interface for business expenses is actually easier to use than TurboTax in my opinion.

Thanks for pointing this out! My brother actually bought his shares in mid-2021, so it sounds like the 2022 survey period would definitely apply to his investment. Do you know if there's any grace period or process for late filing if he missed the deadline?

If your brother bought his shares in mid-2021, then yes, his ownership would need to be reported in the 2022 benchmark survey. Regarding late filing, the BEA does have a process for this. They generally encourage companies to file even if they've missed the deadline. While there are potential civil penalties for failing to file (up to $48,000), the BEA typically works with businesses to get the information rather than immediately imposing fines. Your brother should contact the company and encourage them to file as soon as possible, explaining it's better to file late than not at all. The company can also reach out to the BEA directly to explain the situation and their intention to file.

From my understanding, the structure you're describing doesn't exempt your cousin from these requirements. The BEA looks at the ultimate beneficial owner when determining foreign investment. If a foreign person owns an LLC that then invests in a C-Corp, the foreign ownership "passes through" the LLC for purposes of the BE-12 survey.

Do you think there's a major difference between CPAs and non-CPA tax preparers in terms of quality and services? I've been using an Enrolled Agent and wondering if I should switch to a CPA.

There can be significant differences between CPAs and other tax preparers, but credentials alone don't tell the whole story. CPAs have broader accounting knowledge and must meet strict education and continuing education requirements, which can be helpful for complex situations or if you need accounting services beyond tax preparation. Enrolled Agents specialize specifically in taxation and are licensed by the IRS, so many EAs are actually more knowledgeable about tax matters than some CPAs. What matters most is finding someone with experience in your specific tax situation - whether that's small business issues, investment properties, foreign income, etc. Ask about their typical clients and whether they have specialized knowledge relevant to your circumstances.

I did! Went back to TurboTax after 3 years with a CPA. For my relatively simple situation (W-2 income, mortgage, some investments), it worked fine and saved me about $650. The software has gotten better over the years. Just make sure you don't have anything super complicated.

What's the easiest way to check your transcript? I tried making an account on irs.gov but got stuck in their verification process.

Same boat! It's absolutely wild that they can just hold onto our money indefinitely with zero explanation. Have you received any letters in the mail at all? I haven't gotten anything which makes me think they aren't actually reviewing anything specific. Just a giant backlog they're slowly working through.