Thanks for this perspective! So if I understand correctly, I need to make sure I return the full $3,200 before December 31st, and get some kind of written confirmation from them that they won't issue the 1099-NEC? Is there any specific form or documentation I should ask for?

Yes, return the full amount before December 31st if you want to avoid the 1099-NEC entirely. Ask them for a receipt or formal acknowledgment of the returned payment that specifically states the date and amount returned, and that no 1099-NEC will be issued for this transaction. There's no specific IRS form for this situation, but you want something on company letterhead that clearly documents what happened in case you're ever questioned about it. Also, keep your own records - bank statements showing both the initial payment received and the return payment you made. Having a paper trail from both sides provides the best protection.

This is the most sensible comment here. Plus if you return the money... you don't have the money anymore! Why give up $3,200 just to avoid some paperwork and maybe a few hundred in taxes? That makes no financial sense.

Do you know if most tax pros are willing to do this kind of "review and submit only" service? I always assumed they wanted to do the whole return from scratch. How did you find one willing to just handle the e-filing part?

Most independent tax professionals (not the big chain places) are flexible with their services. I called a few local accountants and asked specifically if they would review and e-file my completed return for a reduced fee. Three out of four said yes. The key is to be upfront about what you want. Just call and say "I've already completed my tax forms but need someone to review them and handle the e-filing process. Do you offer this service and what would you charge?" The chains like H&R Block usually have fixed packages, but independent CPAs and enrolled agents are often willing to customize their services to what you actually need.

I had the same experience. Free File Fillable Forms actually messed up calculating my student loan interest deduction last year. The numbers didn't transfer properly between forms and I almost submitted with errors.

That's exactly the kind of issue I ran into! The worst part was that I didn't catch it until the very end of the process when reviewing the final calculations. By that point I'd already spent hours entering everything. I think I'll try one of the options mentioned above this year. Either getting a tax pro to handle the e-filing part or trying that taxr.ai service that converts the PDFs. Anything to avoid the buggy free forms again!

That's really helpful, thanks! Do you know if I need to include any special forms besides Schedule D for the capital loss carryover? And will Free File guide me through that process?

You'll need Form 1040 (the main tax return), Schedule D (Capital Gains and Losses), and possibly Form 8949 (Sales and Other Dispositions of Capital Assets) depending on your specific situation. These forms work together to document your capital loss carryover. Yes, the IRS Free File program will guide you through completing these forms. Most Free File software will ask about capital losses from previous years and help you properly document the carryover. Just make sure you have your previous year's tax return handy so you can accurately enter the carryover amount.

Did you end up losing the deduction completely or were you able to fix it somehow?

The mileage tracking is a great tip! Do you use any particular app to track it, or just keep a manual log? And for the home office deduction - my cattery actually takes up about 40% of my home (dedicated breeding rooms, nursery, etc.). Is there a limit to how much of your home you can claim for business use?

I use MileIQ app for tracking - it automatically logs all my drives and I just swipe right for business trips. Super easy and worth the subscription fee since it saves me hours of manual logging. For home office space, there's no specific percentage limit, but larger percentages might increase audit risk. The key is that the space must be used EXCLUSIVELY for your business. If your cattery truly uses 40% of your home exclusively for the business, you can claim it, but make sure you have good documentation - take photos of the spaces, have a floor plan with measurements, and keep records of business activities that happen in those areas. If you ever get audited, you'll need to prove that those spaces are used solely for the cattery.

This is really important! I've been breeding Maine Coons for 6 years and the tax implications of retiring breeding stock can be significant. Do you need to track the depreciation individually for each cat, or can you group them together as a single asset class?

That's really helpful! What specific language did you use when requesting this "technical advice memorandum"? And how long did the whole process take from your initial request until they actually issued a corrected form? I'm worried about tax filing deadlines approaching.

I basically said: "I'm formally requesting a technical advice memorandum explaining the tax classification of this payment under IRC Section 61 and why it constitutes interest income rather than compensation for damages or administrative delay. Please include references to the specific tax code provisions and rulings you're relying on for this classification." The whole process took about 3 weeks, but I started early. If you're concerned about deadlines, you can always file for an extension to give yourself until October. Just remember that if you end up owing, you still need to pay the estimated amount by the regular filing deadline to avoid penalties. But based on what you've described, I think you have a strong case for reclassification.

This is a really good point! My sister received HAF assistance in 2023 and didn't have to report it as income. The IRS website (I just checked) says that payments from qualified disaster relief programs are generally not taxable. I wonder if the "interest" portion could be considered part of the overall assistance package rather than traditional interest income.