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I think everyone is missing something important here. If you're receiving multiple wire transfers under $10,000 that collectively add up to more than $10,000, this could potentially be flagged as "structuring" by banks or the IRS - even if that's not your intention. Structuring is deliberately breaking up transactions to avoid reporting requirements and it's actually illegal under anti-money laundering laws. I'm not saying you're doing this intentionally, but the pattern might raise red flags. My advice? Document EVERYTHING. Keep records of all your original purchases, sales agreements with your buyer, shipping receipts to the Portland facility, etc. If you're ever questioned, you want to clearly demonstrate this is simply selling personal items.
That's really helpful and kind of concerning - I definitely don't want to accidentally look like I'm doing something illegal! Is there anything specific I should do besides keeping good records? Should I mention anything to my bank about these transfers?
You don't necessarily need to proactively contact your bank, as they're already monitoring transactions. Just be completely transparent if they ask any questions. What I would strongly recommend is keeping a detailed spreadsheet with dates of all purchases and sales, original purchase prices (receipts if you have them), sale prices, and the purpose of each transaction. Take photos of the clothing items before shipping as additional evidence. Also save all communication with your buyer that shows these are legitimate sales of personal items. If you file taxes with an accountant, discuss this situation with them so they're aware of the full context.
Just wanted to add one more thing - if your total sales exceed $600 in a year (which yours clearly do), you might receive a 1099-K from your payment processor or bank. This is just an information reporting form and doesn't automatically mean you owe taxes on the full amount. You'll still need to determine your "basis" (what you originally paid) for the items to figure out if you had a gain or loss. Most people selling personal clothing collections typically sell at a loss, which wouldn't be taxable.
For your specific situation with a husband/wife LLC, have you considered a Solo 401k with a separate SIMPLE IRA for your employee? Here's why: Solo 401k for owners: - Maximum contribution potential - Lower administrative costs - Simpler testing requirements SIMPLE IRA for employee: - Only requires 2-3% match - Almost no administration fees - No testing requirements This dual approach often works better cost-wise than a single 401k plan covering everyone when you have just 1-2 employees. The downside is you need to manage two different plans.
Is this approach actually legal? I thought if you offer a retirement plan it has to be available to all eligible employees. Wouldn't having separate plans violate some non-discrimination rules?
This is a common misconception. The key is in how you structure the business entities. If the owners operate through a separate entity (like a partnership) from the employee-hiring entity, then you can legally establish different plans. You'd need to consult with a tax professional to ensure your specific business structure qualifies, but many small businesses with similar structures to yours successfully implement this dual approach. The critical factor is having proper documentation of the separate business entities and ensuring you follow all IRS guidelines for each plan type.
Speaking from experience, we have a similar LLC (me and my wife plus 2 employees) and we went with Guideline for our 401k. Only $49/month plus $8 per participant, so WAY cheaper than what Paychex quoted you. Their platform integrates with most payroll systems too. For maximizing contributions, we did a Safe Harbor 401k with 4% match, then added a discretionary profit sharing component that allowed us to contribute more for ourselves while staying within IRS guidelines. We were able to get almost to the $61,000 annual limit for each of us.
When I did my OIC last year, I had the exact same confusion. The calculator was saying I owed based on money I needed for rent and utilities! I ended up getting help from a tax advocate who explained that there's a big difference between the simplified online calculator and the actual OIC process. Here's what worked for me: I attached a detailed document to my OIC application that broke down all my monthly expenses with supporting documentation (copies of bills, rent statements, etc.) Then I explicitly calculated my exempt amount ($1,000 + monthly expenses) and showed how my bank balance was below that threshold. My OIC was accepted with this approach, even though the online calculator had suggested I owed more. The IRS reviewers do understand this concept, but you need to spell it out clearly in your application.
That's really helpful! Did you use a specific form for that detailed expense breakdown or did you just create your own document to attach? And did you have to get anything notarized or officially verified?
I created my own spreadsheet that listed each expense category (housing, utilities, food, transportation, etc.) with the monthly amount and annual total. I didn't get anything notarized, but I did include recent statements for everything - utility bills, bank statements showing rent payments, etc. I also wrote a cover letter explaining my financial hardship situation and specifically referenced IRM 5.8.5.22 (the Internal Revenue Manual section that covers the bank account exemption). The tax advocate told me that making it easy for the reviewer to verify your information greatly increases your chances of approval.
Has anyone actually had an OIC accepted recently? I've heard the IRS has gotten much stricter since COVID and is accepting fewer offers.
I had mine accepted about 3 months ago. The acceptance rate is lower, but that's largely because people submit incomplete or inaccurate applications. If you document everything thoroughly and calculate your offer correctly, you've still got a good chance.
For your college assignment, don't forget about the passive activity loss limitations on Schedule E. This is something that often trips up students (and sometimes even professionals!). If your fictional taxpayer has a loss from the rental property, they might not be able to deduct the full amount depending on their income level. For 2017 specifically, if their modified adjusted gross income was under $100,000, they could deduct up to $25,000 of rental losses. This deduction phases out between $100,000-$150,000 of MAGI. If they made over $150,000, generally they couldn't deduct any losses that year (they'd be carried forward instead).
Thank you for mentioning this! My fictional taxpayer has an AGI of $123,000, so they'd be in that phaseout range. How exactly do I calculate the deductible portion of the $7,500 rental loss in this case? Is there a specific worksheet in the instructions?
For an AGI of $123,000, you're right in the middle of the phaseout range. The calculation is pretty straightforward: you lose $0.50 of the $25,000 maximum deduction for every $1 over $100,000. So take $123,000 - $100,000 = $23,000 over the threshold. Multiply that by 0.5 = $11,500 reduction. This means your maximum deduction would be $25,000 - $11,500 = $13,500. Since your loss is only $7,500, you can deduct the entire amount because it's less than your modified maximum. Form 8582 is where you'd calculate this for a real return, but for your assignment, just showing this calculation should be sufficient unless your professor specifically required Form 8582 as part of the project.
Just wondering, what tax software are you using for this assignment? When I took my tax class we used an older version of TaxAct that the school provided, but it was super glitchy with the 2017 forms.
Our professor had us use the free fillable PDFs from the IRS website for older tax years. Way less headache than dealing with outdated software! You can still download the 2017 forms and instructions directly from irs.gov/prior-year
Harper Collins
Have you tried contacting the Taxpayer Advocate Service? They're an independent organization within the IRS designed to help taxpayers who are experiencing hardship or having problems that haven't been resolved through normal IRS channels. Their number is 877-777-4778. They might be able to help escalate your issue, especially if you're facing a deadline.
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Kelsey Hawkins
ā¢The Taxpayer Advocate Service is practically useless these days. I tried contacting them for help with an identity theft issue and they told me they're so backlogged they're only taking "extreme hardship" cases. Apparently owing the IRS $9,000 I don't actually owe isn't "extreme" enough lol.
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Harper Collins
ā¢That's disappointing but unfortunately not surprising. Their resources have been stretched thin over the past few years. For identity theft cases specifically, the IRS has a specialized unit you can contact directly at 800-908-4490. They handle cases where someone filed a fraudulent return using your information. For the incorrect tax debt situation, you might need to send a formal written dispute with certified mail. It's slower but creates an official record of your dispute that's harder for them to ignore. The key is to explicitly state the economic hardship the incorrect assessment is causing you - using those specific terms can help get your case prioritized.
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Dylan Fisher
If you're having trouble with the IRS website, have you considered using a different browser or clearing your cache? Sometimes their site has weird compatibility issues. Also double check that you're on the official irs.gov site and not some spoofed version. There are a ton of scam sites that look like the IRS.
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Edwards Hugo
ā¢This isn't a browser issue, it's the IRS being understaffed and overwhelmed. No amount of clearing cache is going to make them respond to a submitted ticket faster š
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