This is really helpful info! Does the First Time Penalty Abatement apply even if I've been filing regular personal taxes on time for years but this is just my first business tax return that's late?

Yes, that's exactly the situation where it typically applies! The IRS looks for a clean compliance history for the three years prior, so if you've filed your personal returns on time and paid what you owed, you'd likely qualify even though this is your first business return. The key is to file your late return first, pay as much as you can of the tax amount (even if not all), and then request the abatement. Don't request the abatement before you've filed the late return. Many people don't know about this program and end up paying penalties they could have avoided.

As a single-member LLC, you should file Schedule C with your Form 1040, not Form 1065. Form 1065 is for partnerships and multi-member LLCs. Since you're the only owner, the IRS treats your LLC as a "disregarded entity" for federal tax purposes, meaning you report all business income and expenses on Schedule C of your personal return. The exception would be if you elected to have your LLC taxed as a corporation (using Form 8832). But if you never made that election, then Schedule C is the correct form.

Thank you for mentioning the SECURE Act changes. Does this still apply if the IRA is first transferred to a trust, and then the trust distributes to these different types of beneficiaries? Or does moving it to a trust first eliminate these exceptions? One of the beneficiaries is my aunt's disabled sibling, so I'm wondering if there might be special provisions that could help in that case.

When an IRA is left to a trust, the ability to use these exceptions depends on how the trust is structured. If the trust qualifies as a "see-through" trust and the disabled sibling is an identifiable beneficiary, then yes, that portion of the IRA might qualify for the exception allowing for distributions over that beneficiary's life expectancy rather than the 10-year rule. This would require specific language in the trust that clearly identifies the disabled beneficiary's portion and likely a separate share for that beneficiary. The trust would also need to meet all the requirements to be considered a see-through trust under IRS regulations. This is definitely a situation where specialized estate planning advice is crucial, as properly structuring the trust could result in significantly better tax treatment for that portion of the IRA.

With Roth IRAs going to a trust, the key benefit that can be preserved is the tax-free nature of qualified distributions. Unlike traditional IRAs where distributions are taxable, qualified Roth distributions remain tax-free even when distributed to a trust or through a trust to beneficiaries. The main thing lost is the ability to stretch distributions over a long period - the SECURE Act's 10-year rule typically applies unless beneficiaries qualify for exceptions. But within that 10-year window, growth remains tax-free, which is still valuable. Generally, it's better to keep the Roth intact rather than distributing before death, as this maintains the tax-free growth for as long as possible within allowable limits.

This is actually really good advice. I was in a similar position with a business vehicle and decided to keep it for an extra year. By that time, I had paid down the loan enough that the sale covered the remaining balance. Plus I was in a lower tax bracket that year, so the depreciation recapture hit me less hard.

We tried that first but ran into issues with the identity verification. Apparently since he's never filed before, there's not enough tax history for the automated system to verify him. It kept rejecting the account creation. So frustrating!

That's common with the ID verification system if you don't have a filing history. Another option is to have him go to a local IRS Taxpayer Assistance Center in person. They can provide transcripts on the spot, and their identity verification process is different than the online system. He'll need to call 844-545-5640 to make an appointment first. Just make sure he brings two forms of ID. The in-person verification might bypass the issues you're having online.

Totally agree! I used to work at one of those places (won't name names) and we were trained to upsell unnecessary services. For a prior year return, we'd charge double or triple the normal fee even though it's the exact same work. The "professional" preparing your taxes often has minimal training too - like a 2-week course.

That's really helpful, I hadn't even thought of that possibility. I'm going to review my paperwork again tonight. Is there a specific term or section I should be looking for in the lease document that would show this?

Look for something called "capitalized cost reduction" or sometimes "lease incentives" in your paperwork. There should be an itemized list of all factors reducing your cap cost, and one of them should specifically mention the federal tax credit or EV incentive. If the amount listed is less than $7,500, they didn't pass on the full credit to you. In my case, they listed it as "EV Tax Credit - $5,000" and when I asked where the other $2,500 went, that's when they admitted they kept it. Some dealers are more transparent than others, but it's always good to check.

This is so true! I leased a Hyundai IONIQ 5 in December thinking I'd get the full credit benefit, but later found out it only qualified for $3,750 because of the battery mineral requirements. The dealer had advertised the full $7,500 in all their materials, which was technically false advertising.