Late to this conversation but wanted to add something I haven't seen mentioned yet - the audit notice probably specifies a response deadline, usually 30 days from the date of the letter. Make sure you respond by that deadline even if it's just to request an extension for gathering documentation! I made the mistake of missing the deadline when I was audited, and it made the whole process much more complicated. You don't want the IRS to make a determination without your input. Also, if you do end up owing money, know that the IRS is generally willing to set up payment plans. You won't have to "work it off" all at once. Just make sure to file Form 9465 (Installment Agreement Request) if you need a payment plan.

I went through something very similar with my 2020 return! Got audited for claiming the EV credit on what turned out to be a regular hybrid (Toyota Highlander Hybrid). I was terrified at first, but it actually worked out okay. Here's what happened in my case: I owed back about $7,500 in credit plus interest (around $300), but the IRS completely waived all penalties after I submitted Form 843 with a letter explaining that I relied on my tax preparer's advice and provided accurate vehicle information. The key was documenting that I gave them the correct VIN and vehicle details - it was their job to verify eligibility. My preparer initially tried to dodge responsibility, but I filed Form 14157 with the IRS to complain about them. That got their attention real quick, and they ended up covering the interest portion as a "goodwill gesture" to avoid further issues. The whole process took about 4 months from audit notice to resolution, but responding quickly and thoroughly made all the difference. Don't panic - honest mistakes happen and the IRS knows it!

Look at Box 16 on your K-1 too! That's where a lot of these items affecting basis are itemized. Your K-1 should have codes and amounts for each item that increases or decreases your basis. For example, Code A is for tax-exempt interest, Code B is for other tax-exempt income, Code C is for nondeductible expenses. If you add up all the positive items and subtract all the negative items from your ordinary business income, you should get the amount on that last line of Schedule K.

Glad to see you figured it out! Box 16 of the K-1 is definitely the key to understanding that final Schedule K line. For anyone else reading this thread who might have similar issues, here's a quick summary of what typically causes differences between ordinary business income and that last line: 1. Non-deductible expenses (Code C) - like the non-deductible portion of meals, penalties, life insurance premiums 2. Health insurance premiums for >2% shareholders 3. Separately stated items like charitable contributions 4. Tax-exempt income (rare for most small businesses but can happen) 5. Depreciation adjustments and Section 179 expenses The IRS instructions for Schedule K can be confusing, but remember that not every dollar of income or expense affects shareholder basis the same way. When in doubt, always cross-reference with your K-1 Box 16 - it breaks everything down by code so you can see exactly what's included in that summary line. Good luck with the rest of your return, Paolo!

FWIW it sounds like your husband's work might be using those new 2025 W-4P withholding tables incorrectly. I'm going through exact same thing with my payroll. New updated tables came out but our payroll company applied them in a way that's drastically reducing withholding for everyone. We literally had a company-wide meeting about it last week when everyone started noticing their withholding dropped to almost nothing overnight. Payroll is supposedly fixing it but said any underwithholding from earlier checks is basically our problem to deal with.

This is incredibly frustrating but unfortunately not uncommon right now. I work in HR for a mid-sized company and we've been getting similar complaints since the beginning of the year. What's likely happening is that your husband's employer's payroll system has a configuration error with the 2025 withholding tables. We discovered our system was incorrectly applying married filing status calculations that assumed significantly higher standard deductions than appropriate, resulting in dramatically reduced withholding amounts. A few immediate steps you can take: 1. Request that your husband's HR department provide documentation showing exactly how they calculated his withholding amount. They should be able to show the math. 2. File a new W-4 immediately with "Single" selected for withholding purposes (this won't affect how you file your actual return) and add extra withholding in step 4(c). 3. Document everything - keep copies of paystubs showing the incorrect withholding amounts, your communications with HR, etc. If HR continues to be unresponsive and multiple employees are affected, this may warrant a complaint to your state's Department of Labor. Employers have legal obligations to implement withholding correctly, and systematic errors affecting multiple employees can result in penalties for the company. Don't let them brush this off as "just how the system works" - withholding of pennies on thousands in wages is mathematically impossible under normal circumstances.

Omg I got so stressed about this last year! My as-of date changed SIX TIMES in two weeks and I was freaking out thinking something was wrong with my return. Called the IRS and waited 2 hours just to be told it was normal. Then my refund was delayed an additional 60 days for "verification" anyway. The changing dates meant nothing in the end. 😭 Don't let it stress you out like it did me!

I've been dealing with IRS transcripts for years as a tax preparer, and those as-of date changes are one of the most misunderstood aspects of the system. What you're seeing is completely normal - the IRS updates these dates based on internal processing milestones, not necessarily your return's actual progress. Here's what I tell my clients: treat the as-of date like a "last touched" timestamp rather than a progress indicator. Your return might sit untouched for weeks with the same as-of date, then suddenly jump forward when it hits an automated checkpoint, then revert when that process completes. For cash flow planning, I'd recommend focusing on the 21-day standard processing timeline from your filing date instead. The transcript dates will drive you crazy if you try to read too much into them. Keep an eye on actual transaction codes (especially 846 for refund issued) rather than the as-of dates.

Does anyone know if the delay also applies to crypto transactions? I thought there was a similar reporting requirement going into effect for crypto exchanges to report transactions over $600.

This is really helpful information, thanks everyone! I've been using multiple payment apps for both personal and business transactions and was definitely confused about what I needed to track. One thing I'm still unclear on - if I'm doing freelance graphic design work and get paid through Venmo or PayPal, but I'm under the old $20K/200 transaction threshold, do I still need to report that income even without a 1099-K? I've been keeping my own records but wasn't sure if it was actually required to report without the form. Also, has anyone dealt with situations where clients pay you through multiple different apps? Like some pay through PayPal, others through Venmo, others through Zelle - does each platform track separately for the threshold, or is it somehow combined?