Could you explain more about the "at-risk" rules? If the property was inherited with no mortgage, how would that affect being "at risk"?

The "at-risk" rules basically limit your deductible losses to the amount you have financially invested in the activity that you could potentially lose. For an inherited property with no mortgage, your at-risk amount would typically include the stepped-up basis of the property, plus any additional money you've invested in improvements or maintenance. Since your basis is $1.6M (according to your post), your at-risk amount is substantial, so it's unlikely to limit your losses in the near term. This is different from someone who might have acquired a property with little money down and a large mortgage, where their at-risk amount might be much smaller than the property value.

I used TurboTax last year for my rental property. It asks questions about your participation level and automatically applies the passive activity rules. It worked well for my situation, but mine was pretty straightforward. With your large stepped-up basis and significant depreciation, you might want to use their Live version where you can talk to a tax expert during the process.

4 Does setting up a payment plan affect your credit score? I'm worried about that since I'm planning to apply for a mortgage later this year...

17 Setting up a payment plan itself doesn't directly impact your credit score - the IRS doesn't report installment agreements to credit bureaus. However, if you owe more than $10,000, the IRS may file a tax lien, which can affect your credit. The good news is that if you owe less than $50,000 and set up a direct debit installment plan, the IRS generally won't file a tax lien. So if you're applying for a mortgage later, getting on a payment plan quickly is actually better than leaving the tax debt unaddressed.

9 Which software specifically has these options? I'm using TaxSlayer and can't seem to find anything like that in their payment section.

But isn't it better to break it into multiple payments? What if I can't come up with the entire amount in one payment, even after 120 days?

If you can't pay the full amount within 120 days, then you definitely want to set up the installment agreement with monthly payments. That's a different option in the online payment system. The installment agreement is great if you need more time, but it does come with a setup fee and you'll have to make regular monthly payments. With the 120-day option, you're just telling the IRS you'll pay in full by a certain date, and they don't charge a setup fee for that arrangement.

This is TERRIBLE advice! Not filing is the worst thing you can do. The IRS charges a failure-to-file penalty of 5% of your unpaid taxes for each month your tax return is late, up to 25%. The failure-to-pay penalty is only 0.5% per month. Plus, there's a statute of limitations on how far back the IRS can audit you, but it doesn't start until you file. So by not filing, you're keeping yourself open to audit indefinitely. I learned this the hard way. Don't repeat my mistake.

Is that actually allowed by the IRS though? Wouldn't they want the payment to come from the person who owes the tax?

The IRS doesn't actually care who makes the payment as long as it's properly credited to your tax account. You just need to make sure the payment includes your name, tax ID number, form type (1040-NR), and tax year. This is common for married couples where one spouse pays both tax bills, parents paying for their kids, or employers paying for employees in some cases. The key is making sure the payment information correctly identifies whose tax account should be credited.

This is terrible advice. The IRS absolutely tracks everything, even small amounts. My friend ignored a $12 balance and two years later got a notice with penalties and interest that had grown to over $40. Just pay what you owe.

Thanks for mentioning that! I had no idea about needing a PTIN or the software costs. Are there any decent budget options for software when just starting out with a few clients, or do you really need to invest in the professional versions right away?

There are definitely budget-friendly options when you're just starting out. TaxAct Professional and TaxSlayer Pro offer lower-cost entry packages for new preparers with a small client base. Some even have pay-per-return options which might be more economical if you're only doing a handful of returns. Drake also offers a "pay-per-return" option that might work better for your first season than their full package. I'd recommend trying the demos of a few different software options before committing - they all have different interfaces and workflows. ProSeries and Lacerte are more expensive but very popular if your business grows.

This is great advice. What resources did you use to learn that specific niche? Were there courses specifically for gig worker taxes or did you piece it together from general tax knowledge?