Thank you for mentioning this! I had no idea about the First Time Penalty Abatement program. Do you know if I would still qualify even though they had already levied my bank account years ago?

Unfortunately, since they've already taken collection actions like bank levies, you probably won't qualify for First Time Penalty Abatement. That program is typically for taxpayers who haven't had prior issues. However, you might still qualify for abatement under "reasonable cause" if you can demonstrate that your failure to file and pay was due to circumstances beyond your control - things like serious illness, inability to obtain records, or certain types of hardship. The anxiety and depression you mentioned might actually help your case, especially if you have any documentation from a healthcare provider.

That's terrible advice. Don't raid retirement accounts to pay tax debt! The IRS payment plans have relatively low interest rates compared to the long-term growth you're giving up. Plus you'll pay penalties on top of taxes for early withdrawal.

That's a great point about the Lifetime Learning Credit! Do you know if the income limits are the same as the AOTC? My brother makes around $65,000 per year, so I wasn't sure if he'd still qualify.

For 2025, the Lifetime Learning Credit begins to phase out at $80,000 for single filers ($160,000 for married filing jointly) and is completely phased out at $90,000 ($180,000 for joint filers). Since your brother makes around $65,000, he would be eligible for the full credit amount based on his qualified expenses. The income limits are slightly different than the AOTC, which begins phasing out at $80,000 ($160,000 joint) and completely phases out at $90,000 ($180,000 joint). So at $65,000 he'd be under the threshold for either credit - it really comes down to which one he's eligible for based on his education status.

This is correct. My tax accountant explained that it's about your academic standing, not time spent in school. A student is considered to have completed the first 4 years if they've completed enough credit hours to be classified as a senior (4th year) or above at their educational institution.

This is really helpful! We have a basic operating agreement drafted but haven't addressed the profit/loss allocation part in detail. Would you recommend getting a specialized business attorney to help with this, or are there good templates we could use as a starting point?

I would absolutely recommend getting a specialized business attorney for this. Templates are a starting point, but with four partners and potentially complex profit-sharing arrangements, you need customization. The attorney cost us about $1,500 for a solid operating agreement, but it was worth every penny. For your escape room business, you'll want specific provisions that address how to handle capital-intensive improvements, marketing expenses, and the sweat equity some partners might contribute versus purely financial investments. The attorney can also help structure things to maximize the tax benefits whether you go MMLLC or S-corp route. Think of it as insurance against future partner disputes.

Does QuickBooks handle the S-corp payroll stuff well? We're starting a similar business and I'm worried about getting the whole "reasonable compensation" thing right.

I use the simplified method for my Etsy shop and it's so much easier than tracking all those expenses. But remember you still need a space that's EXCLUSIVELY for business use. I converted a small closet (about one-sixth of my apartment's square footage) to store inventory and take product photos, and I only claim that area.

That's an interesting alternative I hadn't considered! Do you know if there are minimum contribution requirements for donor-advised funds? My relatives aren't wealthy - they're just making modest donations ($2-3k annually) but take the standard deduction because it's higher than their potential itemized deductions.

Most of the major donor-advised funds (Fidelity Charitable, Schwab Charitable, Vanguard Charitable) have minimum initial contributions of $5,000, but some community foundations offer them for as little as $1,000 to get started. The real power comes from "bunching" - instead of donating $3k each year, they could save up and donate $9k every third year. In the "bunch" year they might have enough deductions to itemize, then take the standard deduction the other two years. This way they control the timing and can maximize tax benefits. There are also no ongoing minimum grant requirements with most funds - you can recommend grants as small as $50 to charities.

This advice could potentially get someone in trouble. While the IRS can't read minds, they absolutely can and do look at patterns of transactions and their timing. If they audit and find a clear pattern showing the gifts were conditional on donation, they could disallow the deduction and potentially add penalties. The substance-over-form doctrine allows the IRS to recharacterize transactions based on their economic reality rather than just their legal form. If the only purpose of the transaction is tax avoidance, it's riskier than people realize.

The key is that there's no legal obligation for me to donate the money. Yes, we have an understanding, but it's not contractually binding. My sister couldn't sue me if I decided to spend the money on a vacation instead. The substance-over-form doctrine typically applies to elaborate corporate tax shelters, not ordinary family financial arrangements. The reality is that the IRS is severely understaffed and focused on much bigger issues than families trying to maximize charitable deductions. Unless you're talking about huge sums of money, this just isn't on their radar.