Thanks for pointing this out. I'm a bit worried about the basis calculations. Does TaxAct walk you through determining each partner's basis properly? We had some complicated transactions this year with one partner contributing equipment instead of cash.

TaxAct does have a basis worksheet that helps guide you through the calculations. For non-cash contributions like equipment, you'll need to enter the fair market value and adjusted basis of the property. The software should handle the Section 704(c) allocations if set up correctly. However, this is exactly the kind of situation where careful attention is required. Make sure you have proper documentation of the equipment's value and basis. The software will ask you these questions, but you need to have the right information ready. If the contribution happened this tax year, you'll also need to complete Form 8824 for the non-cash contribution. The preview method you originally suggested would likely miss these interconnected forms.

Yep, this happened to me too. Had to file amended returns for both the partnership and personal returns. Such a headache. The Section 199A stuff is super easy to miss if you're not familiar with it.

What happened when you missed the October deadline? Did they hit you with the full $435 penalty even though you had filed the extension?

I got hit with a failure-to-file penalty that started accruing after the October deadline. In my case I did owe a small amount (about $800) so the penalty was a percentage of that. It wasn't the full $435, but it was still annoying to pay extra for no reason. They also didn't process my capital loss carryforward correctly at first, which caused problems the next year. I had to call and explain the situation, and it took several months to sort out. Just not worth the hassle!

I've used FreeTaxUSA for the last 3 years with capital losses. It handles carryovers pretty well - you just need to enter the previous year's carryover amount in the right field. The interface is a bit basic but it gets the job done and it's way cheaper than TurboTax.

Does it matter if the family member business is an S-Corp vs sole proprietor? My sister started paying me for IT work but her business is just a Schedule C.

The business structure does make some difference in how the transactions are reported, but the fundamental requirement that transactions be legitimate business activities at fair market value applies regardless of structure. With an S-Corp, there's typically more formal documentation and separation between the business and owner, which can help establish legitimacy. With a sole proprietor/Schedule C business, transactions between family members often receive more scrutiny because the line between business and personal is less formal.

This is the most sensible advice here. The standard mileage rate is so much simpler and the IRS rarely questions it as long as you have a mileage log. Taking huge vehicle depreciation for minimal business use is asking for trouble. The IRS isn't stupid.

They only catch it within a single employer. If you change jobs mid-year like OP did, the new employer doesn't know what you contributed at your previous job unless you tell them. Each payroll system just tracks against the annual limit starting from $0 when you join.

Ah that makes sense! I've been at the same company for years so never encountered this. Seems like there should be a better system for tracking this between employers!

This is terrifying. So even though my spouse handled all the finances and made the decision not to pay these taxes without telling me, I could still be held personally liable? Do they ever consider these kinds of circumstances?

They do consider circumstances, but you'll need to prove you weren't a "responsible person" as defined by the IRS. The fact that you were an owner and involved in the business creates a presumption that you had authority. However, your tax attorney can help build a case based on your specific role. Key factors they look at: Who had check-signing authority? Who made financial decisions? Who had the power to determine which creditors got paid? If you can demonstrate your spouse exclusively controlled these functions and deliberately kept you in the dark, you may have a case. Document everything about your roles and responsibilities in the business.

This! I got transcripts and found out the collection agency was trying to collect on some taxes where the assessment date was 12 years ago. When I pointed this out, they immediately removed $9k from what I "owed" because it was past the statute. Collection agencies often don't check this.