Oh wow, I hadn't even thought about the insurance angle! Do you know if there's any way to get a discount on the HOA fees themselves during vacancy periods? The pool and gym aren't being used, after all. And would getting a vacancy insurance policy cause any red flags with the IRS regarding my intent to rent?

Most HOAs don't offer vacancy discounts since the common areas still need maintenance whether your unit is occupied or not. You can always ask your HOA board, but in my experience it's unlikely. Getting a vacancy insurance policy won't raise any red flags with the IRS. In fact, it strengthens your case that you're taking proper care of your rental business assets. It demonstrates you're being responsible while the property is between tenants. The IRS understands that vacancies are a normal part of the rental business - what they care about is that you're genuinely attempting to rent the property and not just leaving it vacant for personal reasons while trying to claim business deductions.

Your accountant is incorrect. I've been a property manager for 15 years and have dealt with many owners' tax situations. The IRS considers you "in business" as long as you're holding the property for income production and actively trying to rent it. Vacancies are an ordinary and necessary part of the rental business. All ordinary expenses during vacancy periods are fully deductible.

I did think about that, but I don't have kids and I'm not in school, so I don't think I've been getting any special credits. Though looking at my return again, I did get that stimulus payment credit last year ($1,400) which definitely isn't there this year. I'm starting to think it was a combination of that missing one-time credit PLUS the withholding changes people mentioned. When I look at the actual numbers, I had about $1,500 less withheld this year compared to last year, even though I made slightly more money. So I guess that's where my refund went!

Yep, that stimulus payment credit would definitely explain a big chunk of the difference! Those one-time credits made a lot of people's refunds unusually large last year. The withholding change is interesting though. If you're worried about owing again next year, you might want to fill out a new W-4 and either reduce your dependents or add an additional amount to be withheld from each paycheck. I usually have them take an extra $25 per paycheck just to be safe - I'd rather get a refund than owe!

This happened to me too but the opposite way! I filed as Single for years but qualified for Head of Household after my niece moved in with me. The difference was like $2000 in my favor. Maybe check if you qualify for a better filing status?

Is there a simple way to figure out which credits I might qualify for? There seem to be so many and the eligibility requirements are confusing.

The most common credits for younger people are the Earned Income Tax Credit (if your income is below certain thresholds), education credits like the American Opportunity Credit or Lifetime Learning Credit if you've paid for college, the Saver's Credit if you've contributed to retirement accounts, and potentially the Child Tax Credit if you have kids. Most tax software will automatically check your eligibility for credits as you go through the filing process. You just answer questions about your situation, and it determines what you qualify for. That's why I recommend software for beginners - it does the heavy lifting of figuring out which credits apply to you.

Do you think that's better than using tax software for a first-timer? I'm worried I'll get totally lost in the forms without guidance.

This is incredibly helpful, thank you! One last question - what happens if I refuse to provide a W-9 to a business client? Not that I would, I'm just curious what the consequences would be.

If you refuse to provide a W-9, the business is generally required to withhold 24% of your payments as "backup withholding" and send that money to the IRS. This is called backup withholding and it's meant to ensure tax compliance. The business might also decide it's too much hassle to work with you without proper documentation. Most businesses take their tax reporting obligations seriously because they can face penalties for failing to properly report payments to contractors. So while there's no direct penalty to you for refusing, it could cost you money through backup withholding and potentially future business relationships.

The $600 threshold has been around forever but a lot of businesses ignore it. With all the new IRS funding and focus on tax compliance, more companies are starting to follow the rules properly.

That makes sense. I definitely noticed more paperwork this year than ever before. The company that asked me for the W-9 was a relatively large boutique that ordered a bunch of custom pieces, so they probably have an accounting department that stays on top of these things.

Thanks for mentioning this! That's exactly what I was worried about. Better to report everything now than deal with notices later. Is there a threshold for the amount that triggers these notices?

There's no specific threshold that I know of. The IRS automated matching program seems to flag any discrepancy, regardless of amount. My brother's notice was for less than $100 in unreported interest income, so even small amounts get caught. The bigger issue is that responding to a CP2000 notice takes time and can be stressful, plus if you end up owing, they'll add interest and possibly penalties from the original due date. Much simpler to just include everything correctly the first time.

This is incorrect advice. Schedule B is for interest and dividends, not capital gains from trading. Capital gains need to be reported on Schedule D and Form 8949. Even with basis reported to the IRS, you still need to include the transactions on your return.