Is anyone else confused about whether closing costs affect the calculation? I sold my house and paid like $25k in realtor fees, title insurance, etc. Can I subtract those from my sale price before figuring out my gain?

Great question about the home improvements! I went through something similar when I sold my primary residence. You absolutely want to add those improvement costs to your basis - they can significantly reduce your capital gain. For the improvements you mentioned (roof and kitchen renovation totaling $42,000), those definitely qualify as capital improvements that increase your basis. Even if you don't have every single receipt, the IRS allows reasonable estimates for legitimate improvements. I'd suggest gathering whatever documentation you do have and making conservative estimates for anything missing. With your numbers: $425K sale price minus selling costs, minus your original $298K purchase price, minus $42K in improvements - you're likely looking at a gain well under the $250K exclusion (or $500K if married filing jointly). One tip: don't forget to include any selling expenses (realtor commissions, title fees, etc.) as they reduce your taxable gain too. TurboTax should handle the forms correctly, but definitely confirm you're reporting it as your primary residence sale to trigger the exclusion properly.

One thing nobody's mentioned yet - make sure you're actually charging significantly below FMV if you're treating this as a "not for profit" rental. IRS might question if you're only $50-100 below market rates. In my experience, they generally look for rentals that are at least 20% below market to qualify for the "not for profit" classification. If you're too close to market rates, they might consider it a regular rental activity where different rules apply. Also, keep good records of comparable rentals in your area to support your FMV determination in case of questions.

I just want to clarify one thing that might be confusing people. Even if you can't deduct losses from a below-FMV rental, you can still potentially deduct expenses that OFFSET the rental income you receive (up to that amount). So if you collect $11,400 in rent annually, you can deduct up to $11,400 in eligible expenses (in that specific order others mentioned - mortgage interest, property taxes, then insurance, etc). This might mean you have zero taxable rental income after deductions, but you can't create a rental loss to offset other income.

For Pennsylvania residents filing 2020 Form 1040 with payment, the correct address is indeed the Cincinnati service center that Javier mentioned. However, I'd strongly recommend double-checking this on the current IRS website since mailing addresses can occasionally change. One thing I haven't seen mentioned yet - since you're filing so late, you might want to consider requesting penalty relief if you have reasonable cause. The IRS can waive failure-to-file and failure-to-pay penalties (though not interest) in certain circumstances like serious illness, natural disasters, or other situations beyond your control. You'd need to include Form 843 (Claim for Refund and Request for Abatement) with your return if you want to request this. Also, make sure you're using the 2020 version of Form 1040 and its instructions, not the current year's form. You can download it from the IRS website under "Prior Year Products." The tax law and forms do change from year to year, so using the correct year's forms is important. Definitely use certified mail with return receipt requested so you have proof of mailing and delivery!

Just to add another perspective - if you're really concerned about your late 2020 return getting lost in the mail or taking forever to process, you might want to consider hiring a tax professional to help you navigate this situation. Many CPAs and enrolled agents have direct lines to IRS practitioner hotlines that can be much more efficient than trying to get through as an individual taxpayer. A tax pro can also help you calculate the exact penalties and interest you'll owe, determine if you qualify for any penalty relief, and ensure your return is prepared correctly to avoid any processing delays or audit flags. Yes, it costs money, but if you're dealing with a complex situation or significant tax liability, the peace of mind and potential savings from their expertise often outweigh the fees. Also, for future reference - the IRS offers payment plans if you can't pay your full tax liability at once. Even for late returns, you can set up an installment agreement either online or by including Form 9465 with your return. This can help manage the financial impact of those accumulated penalties and interest.

That pre-filing freeze from February is a red flag - it usually means the IRS had your SSN flagged in their system before you even submitted your 2023 return. This could be due to identity verification issues, prior year problems, or suspected fraud activity on your account. The codes 971/977 from June likely represent IRS-initiated adjustments rather than something you filed. When the IRS finds discrepancies during processing, they sometimes code it as an "amended return" even though it's their internal correction. Your cycle 1305 puts you in a later processing batch, but with that 810 freeze active, cycle timing becomes irrelevant until it's resolved. The sequence numbers indicate your case is in manual review. I'd strongly recommend: 1. Call the IRS directly at 1-800-829-1040 to ask about the February freeze 2. Request all notices sent to your address - you may have missed something 3. Consider contacting Taxpayer Advocate Service if you've been waiting over 21 days past your cycle date Don't expect movement until that 810 code is cleared. The amendment processing will add 16+ weeks once the freeze is lifted.

The February freeze date is definitely the key issue here - that's what's holding everything up. When you see an 810 code dated before your filing date, it usually means the IRS had a systematic flag on your account, possibly from identity theft, prior year issues, or income reporting discrepancies they detected through third-party matching. Those 971/977 codes from June are likely IRS-generated adjustments, not something you filed. They often code their internal corrections as "amended returns" even when the taxpayer didn't submit anything. A few things to check: - Log into your IRS online account to see if there are any notices posted there - Call 1-800-829-1040 and ask specifically about the February 8th freeze code - Check if someone may have attempted to file a return using your SSN early in the year The cycle 1305 timing becomes irrelevant with that active freeze. Until the 810 is resolved, your refund stays frozen regardless of processing cycles. Once lifted, you're still looking at additional weeks for the amendment processing. This situation definitely warrants a call to Taxpayer Advocate Service (1-877-777-4778) since you've been impacted for months without clear communication from the IRS.

Has anyone dealt with the tax consequences if the IRS accepts the revocation? I'm thinking about revoking my S-Corp too, but I'm worried about how to handle things like the built-in gains tax or other penalties.

I've been through this exact scenario with a client earlier this year. The timing is actually in your favor since you're still within the same tax year. Here's what worked for us: We submitted Form 8832 with a detailed letter explaining that the S-Corp election was made in error and requesting to revert to disregarded entity status. The key was emphasizing that no S-Corp tax returns had been filed and no payroll had been processed under the election. The IRS approved our request within about 6 weeks. What really helped was including a copy of the original S-Corp election acceptance letter and clearly stating that we wanted the entity treated "as if the S-Corp election had never been made." For New Jersey, you'll definitely want to contact them separately. NJ doesn't automatically follow federal changes, so you may need to file additional paperwork there. Honestly, if your client is having serious doubts this early, it's probably worth pursuing the revocation rather than being stuck with an unwanted election for 5 years. The administrative burden of S-Corp compliance isn't worth it if it doesn't fit their business model.