Would this apply in my situation? I've always filed on time before - this is literally the first year I've ever missed. Are there special forms I need to fill out to request the abatement?

Yes, this would absolutely apply to your situation! The First Time Penalty Abatement is specifically designed for people who have been compliant in the past but had a one-time issue. You don't need special forms - you can request it by phone when you call the IRS, or include a penalty abatement request letter with your late return explaining your situation. You can also request it after receiving a penalty notice. Just be sure to mention "First Time Penalty Abatement" specifically when you make the request.

Make sure you're still withholding enough from your paychecks. I had the same issue because I had accidentally claimed too many allowances on my W-4, so not enough tax was being taken out during the year. Fixed that and now I'm good.

Thanks for this clear explanation! We haven't filed taxes for the LLC yet since we just formed it last year. So if I understand correctly, since we're in Arizona (community property state), we can treat our husband-wife LLC as a disregarded entity and each file a Schedule C, but this isn't technically using the QJV provision? Does this option have a specific name or form we need to reference when filing?

You're welcome! Yes, that's exactly right. Since you're in Arizona and haven't filed yet, you can start off treating your LLC as a disregarded entity without any transition issues. This treatment doesn't have a special name or require a specific election form. You simply file your Schedule C forms with your joint tax return. However, I recommend including a statement with your return explaining that you're treating the LLC as a disregarded entity under Rev. Proc. 2002-69 to make it clear to the IRS what you're doing. This isn't technically required but helps prevent confusion.

Yes, I've done exactly this in California. Changed from filing Form 1065 (partnership) to Schedule C after learning about the community property state exception. Saved us about $400 in preparation fees plus simplified our quarterly estimated tax payments. You should know that switching from partnership to disregarded entity treatment is technically a partnership "liquidation" on paper though. We had to file a final partnership return the year we switched. I'd recommend getting professional help for the transition year.

Any recommendations on where to get historical documents appraised without risking damage? I have some old property tax records from 1880s Manhattan that I've been keeping in a box.

For historical document appraisals, I'd recommend contacting a reputable auction house like Christie's or Sotheby's for high-value items, or a local auction house that specializes in historical documents if you want something less intimidating. They typically have experts who know how to handle fragile items. Another great option is to reach out to university libraries with special collections departments, particularly ones with focuses on economic or New York history. Places like NYU or Columbia have experts who can give you information about the historical significance while properly handling the documents. They often offer free consultations even if you're not planning to donate, and they use archival-quality gloves and proper lighting to prevent damage.

That's fascinating! Did traveling salesmen get any special tax treatment back then? Like deductions for being on the road?

Thanks for this info! Do you know what specific documentation he should prioritize gathering to prove his son lived with him? The tax preparer mentioned school records but I'm wondering what else would be helpful.

He should prioritize documentation that spans the entire year to show the child lived with him for more than half of it. School records are excellent, but he should also gather: Medical records showing him as the parent bringing the child to appointments, along with his address. Childcare receipts with his address and son's name are extremely valuable if he has any. Cell phone bills showing communication with the school or child if applicable. Bank statements showing regular purchases for child supplies at locations near his home can help establish a pattern. If he receives any state benefits for the child or has the child on his health insurance, those documents are golden. Also, any court documents about custody arrangements are crucial if they exist. The more documentation spanning different months of the year, the stronger his case will be.

You absolutely can claim nieces and nephews or other relatives if they meet the IRS tests for qualifying dependents. They need to live with you for more than half the year, you need to provide more than half their support, they can't provide more than half their own support, and they can't be claimed by anyone else.

That's excellent advice I hadn't considered. Our attorneys are still drafting the initial separation agreement, so I'll make sure to include specific language about the inherited IRA tax liability. Would it be helpful to also include language about any potential future audits related to that money?

Absolutely include language about potential future audits! You want the agreement to cover not just the current known tax liability, but any future claims, audits, penalties, or interest that might arise related to that inherited IRA distribution. It's also worth specifying that your ex must provide proof of payment of these taxes as part of the divorce settlement. That way you have documentation that the tax obligation was satisfied, which can protect you if questions come up years later. Many people don't realize the IRS can look back several years, so protecting yourself long-term is important when untangling finances in a divorce.

Great point! Your tax filing status is determined by your marital status on December 31st of the tax year. If the divorce isn't finalized by then, they'll still be considered married for tax purposes and can choose either MFJ or MFS. If it is finalized by then, they'd file as single or possibly head of household.

Thanks for confirming that. I should have mentioned I went through this last year - our divorce wasn't finalized until February this year, so we had to make the MFJ vs MFS decision for last year's taxes. We ended up filing separately despite some lost deductions because my ex had some serious tax issues I wanted to avoid. Definitely worth the peace of mind even though it cost me about $800 more in taxes.