This is really scaring me. I did sign checks but my partner handled the accountant communications. I trusted him to manage that part while I focused on operations. Are you saying I could be on the hook for the entire amount?

Unfortunately, yes - having check signing authority is one of the major factors the IRS considers when determining who is a "responsible person" for payroll taxes. The IRS doesn't care about your internal agreements regarding who was supposed to handle what - they look at who had the ability to ensure the taxes were paid. That said, this doesn't mean all hope is lost. You should immediately gather documentation showing your partner's role in financial decisions. Emails, texts, meeting notes - anything showing he was primarily responsible for tax matters. While this won't necessarily eliminate your liability, it might help distribute the burden appropriately between partners.

This 100%. I spent months arguing with the IRS before getting a transcript that showed they had applied our Q4 payment to the wrong tax year. The notice amounts don't always tell the full story.

That's a good point I hadn't considered. Do you know approximately how many checks he was cashing before the bank said something? I'm only planning to do this occasionally when my friend is really in a bind for cash.

He was doing it about 3-4 times a month for several friends, and the bank noticed the pattern after about 6 months. The amounts were also larger, usually between $500-1000 each time. If you're just doing it occasionally for one friend with smaller amounts like $210, you're probably not going to trigger any red flags. Just keep it infrequent and you should be fine. Banks are mainly looking for patterns that suggest an unauthorized business, not one-off favors for a friend.

Not all banks have the same policies though. Some online banks are great about quick funds availability while others are terrible. Probably depends on your account history and credit score too.

1 Thank you for mentioning the income limits! I forgot to include that in my original post, but thankfully I'm well under those thresholds as a grad student. My stipend and part-time work put me around $35,000 for the year, so I should be eligible for the full Lifetime Learning Credit amount. Do you know if qualified expenses for LLC include the same things as AOTC? Like textbooks, supplies, etc., or is it more limited?

5 The Lifetime Learning Credit is a bit more restrictive on qualified expenses compared to the AOTC. For the LLC, qualified expenses generally include tuition and fees required for enrollment. AOTC is more generous and explicitly includes course-related books, supplies, and equipment that aren't necessarily paid to the educational institution. For the LLC, these additional expenses typically only count if they're paid directly to the school as a condition of enrollment. So if you bought textbooks from the campus bookstore or Amazon, those would likely qualify under AOTC but not LLC. However, if your course fees include a required materials fee paid to the school, that would count for LLC.

22 Yes, you absolutely can claim different education credits for different eligible students in the same tax year. You could claim the Lifetime Learning Credit for your graduate expenses and the AOTC for your daughter's undergraduate expenses on the same tax return. Just make sure you fill out a separate Form 8863 for each student and credit. The main restriction is that you can't claim both credits for the same student in the same tax year.

That's a really good point I hadn't considered at all. So would it be better to have two separate LLCs in that case? Would that substantially increase my paperwork/costs?

Yes, from a liability protection standpoint, two separate LLCs would offer better protection. If something happens in your courier business, the game development assets would be sheltered in the separate LLC. It does increase some paperwork and costs. You'd pay two state filing fees (usually $50-$150 per LLC depending on your state), potentially two annual report fees, and would need to maintain separate books, bank accounts, and records for each entity. If you're a single-member LLC filing as a pass-through entity, the tax filing isn't substantially more complicated - you'd just have two Schedule Cs instead of one. A middle ground some people choose is starting with one LLC, then separating into two once the second business (game development) actually starts generating some revenue or when the assets become valuable enough to justify the extra protection.

That's such a smart approach! How complicated was it to set up the DBAs? And did you need separate bank accounts for each one?

That's a great system. Do you have clients sign anything acknowledging that you've reviewed these documents with them? I'm trying to create a good paper trail in case of audits.

Yes, I have clients sign a due diligence checklist that lists all documents I've reviewed and questions I've asked. It includes statements confirming eligibility for each credit they're claiming. I also take notes during the interview process showing any follow-up questions I asked when something seemed unusual or inconsistent. These interview notes have been extremely valuable during IRS reviews to demonstrate I did proper due diligence beyond just collecting documents.

They're definitely getting penalties! The IRS has been cracking down on the big chains. One of them was hit with over $2 million in penalties last year for EITC due diligence failures. They just build expected penalties into their business model.