So what should OP do about the notice? Just ignore it? Or should he at least call when he gets back to confirm everything is okay?

This is such a good point. Most tax advice seems geared toward either really poor people qualifying for earned income credits or rich people with complex investments. What about us regular folks making between $60-120k? We need help too!

Exactly! The middle class gets squeezed the most it seems. We make too much to qualify for many credits but not enough to benefit from fancy tax strategies with investment properties and such. I think most people in our situation just don't know what options we have available. I'd love practical advice like "if you make X amount, here are the 3 most impactful things you can do to reduce your tax bill" with actual numbers and examples. Or even a checklist of things to consider based on your life situation (married, kids, homeowner, etc).

I switched from TurboTax to FreeTaxUSA last year and saved like $120 for basically the same service. But I'm always nervous about missing something too. Would love to know from an actual CPA what tax situations are too complex for software.

This is a really good point! So for documentation purposes, would things like rental listings, a copy of the lease agreement, and property management contracts be sufficient? My property was vacant for about 2 months between when I moved out and when I found tenants, so I'm not sure exactly when it counts as "placed in service.

Yes, those documents would be excellent proof. The IRS considers a property "placed in service" when it's ready and available for rent - not necessarily when you actually get a tenant. So if you moved out, did any needed repairs/updates, and then listed it for rent, the property is considered "placed in service" on the date it was first available to rent (when you started advertising it). The key is being able to prove that date with documentation. Save copies of rental listings showing the date posted, emails with potential tenants, records of any improvements you made specifically for rental purposes, and definitely the final lease agreement. If you hired a property manager, their contract and any correspondence about listing the property would also be excellent documentation.

Did TurboTax automatically know to include the real estate commission from the original purchase? I'm using H&R Block software and it didn't specifically ask about that.

That's terrible advice. The IRS receives copies of all W2s and their system automatically matches them to tax returns. Just because your brother got lucky doesn't mean it's smart to intentionally ignore a known error. The penalties and interest will be much worse if you wait for them to find it.

I'm not saying it's the right thing to do, just sharing what happened in my brother's case. It's ultimately about risk tolerance. For small amounts, sometimes the IRS collection efforts cost more than they'd recover so they don't pursue it. You're right that the proper action is to file an amendment. I was just offering a different perspective based on a real experience. Everyone has to decide their own comfort level with risk.

It depends on your overall tax situation, but as a rough estimate, you'd owe your marginal tax rate on that amount. So if you're in the 22% bracket, that's about $528 plus potential penalties and interest. The penalty for not reporting it can be around 0.5% per month up to 25% of the tax owed, plus interest that compounds daily.

Thanks! That helps put it in perspective. Definitely not worth risking penalties over that amount. I'll go ahead and file the 1040-X.

I honestly hadn't considered that angle! I was briefly part of a small partnership about 6 years ago that dissolved, but we remained on good terms. I never thought they might still be using my info for something, but I'll definitely reach out to my former partner to check. That said, I'd still expect the IRS to be able to tell me who's making these payments. It's bizarre that they claim they can't see the source when it's their own payment system.

Glad I could suggest something helpful! The IRS systems are surprisingly disconnected from each other. The department that processes payments often doesn't have access to the details of who submitted them, especially for third-party payments. When you talk to your former partner, ask specifically if their accountant might be making these payments. In my case, the accountant had set up an automated system years earlier and nobody thought to update it after our business relationship ended. Definitely check on that possibility before going through all the hassle with the IRS.

This is good advice. I work in tax preparation, and I've seen several cases where the IRS corrected errors years later and then demanded repayment with interest and penalties. Document everything and maybe consider putting those refund amounts into a separate savings account so you have the money available if they ever come asking for it.