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.

Do wire transfers even generate 1099-Ks though? I thought those were mainly for payment platforms like PayPal, Venmo, etc.

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.

That sounds perfect! $49/month is much more reasonable. Does Guideline handle all the compliance testing and Form 5500 filing? Also, could you explain a bit more about how the discretionary profit sharing worked in your case?

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.

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.

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.

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

Do you remember approximately how long it took for the IRS to process your e-filed 1040-X through FreeTaxUSA? I've heard horror stories about paper amendments taking 6+ months, wondering if e-filing is significantly faster.

It took about 7 weeks from submission to getting my refund, which was significantly faster than paper filing. The IRS sent an acknowledgment of receipt within 2 days of e-filing, which gave me peace of mind that they actually had my amendment. From what I've heard, paper amendments are taking 6-12 months right now, so e-filing is definitely the way to go if you qualify. Just make sure your changes are for forms that support e-filing - not all schedules can be e-filed for amendments even now.

Actually this isn't always true. If you've had tax payments applied to the year in question after filing (like estimated tax payments that were applied forward or carryforwards from other years), the deadline can be extended to 2 years from the date of the last payment rather than 3 years from filing. Worth checking if this applies to your situation OP.

Quick question - does filing an extension for your original return extend the amendment deadline too? Like if someone filed a 2019 extension until October 2020, would they have until October 2023 to amend?