Thanks for the suggestion about Publication 544! I just pulled it up and found the exact section you mentioned. I'm going to email this to my tax preparer tonight along with a few examples. If she still doesn't get it after reading the IRS's own publication, I think I'll definitely need to find someone new to help with my taxes. Really appreciate everyone's help here. It's been driving me crazy thinking I was missing something obvious!

Glad I could help! Just to add one more resource - if you look at the actual Form 8949 instructions, there's a worksheet that clearly shows how to report transactions where the purchase and sale dates are in different years. That might be the most direct evidence to show your preparer. Good luck! And yes, if she still doesn't understand after seeing the actual IRS guidelines, it might be time to find someone with more experience in investment taxation.

That real estate comparison is perfect! Makes it super clear even for people who don't understand investments.

Thanks for the heads up. I was afraid of that. I just checked my credit report and there are no liens showing up yet, so maybe I caught it in time? Would the liens definitely show on my credit report or could they exist without showing up there?

Tax liens don't always show up on credit reports anymore - the credit bureaus changed their policies a few years back. The absence on your credit report doesn't guarantee there's no lien. You should request an "Account Transcript" from the IRS for each tax year to see exactly where you stand and what actions they've taken. You can request these online through the IRS website if you can create an account, or your tax professional can request them for you with proper authorization. These transcripts will show if they've filed SFRs, assessed penalties, or initiated collection actions.

The Fresh Start Initiative can definitely help in your situation. It expanded options for installment agreements and offers in compromise. One key benefit is penalty abatement - especially for first-time non-filers. You might qualify to have some penalties reduced or removed entirely.

Thank you for mentioning this! I had no idea about the Earned Income Tax Credit. Would I need to fill out additional forms to claim this, or is it something that's automatically calculated when I file my taxes?

You don't need to fill out any additional forms! When you file your tax return, the EITC is calculated on Schedule EIC which is included in most tax preparation software automatically. The software will ask you questions about your dependents and income, then determine your eligibility and calculate the credit amount. For tax year 2025, with three qualifying children and your income level, you could potentially receive a substantial refund through the EITC. It's designed specifically to help working people with low to moderate income, especially those with children.

This is so important! I filed as Single for years before realizing I qualified as Head of Household with my dependent. Missed out on hundreds in refunds. Just make sure you meet the requirements - generally you need to pay more than half the cost of keeping up a home for yourself and a qualifying dependent.

9 Do you have any tips for finding a good CPA that won't charge an arm and a leg? I've called around and gotten quotes between $350-600 which seems really high.

22 For finding an affordable CPA, check with your local Chamber of Commerce or ask colleagues who are in similar financial situations. Many smaller accounting firms or independent CPAs charge less than the big tax prep chains while providing more personalized service. Another option is to look for an Enrolled Agent (EA) rather than a CPA. EAs specialize specifically in taxes and often charge less than CPAs while still having excellent tax knowledge. For your situation, an EA might be perfect since you don't need full accounting services, just tax expertise.

16 I used TurboTax Live last year for my return which included some freelance work and education expenses. It was decent - you get to video chat with a CPA who reviews your return, but I found the experience a bit rushed. The CPA spent about 15 minutes on my return which wasn't enough to dig deep into potential optimizations.

Doesn't this still require them to charge market rate interest though? And wouldn't the OP still need to qualify for the mortgage with their limited student income? I'm curious how this would work practically.

The IRS only requires what's called the Applicable Federal Rate (AFR) for family loans, which is typically much lower than market mortgage rates - sometimes less than half. In January 2025, the long-term AFR is only around 3.4% while market mortgage rates are over 6%. Regarding qualification, that's the beauty of a private family loan - there's no formal qualification process like with a bank. The grandparents can set whatever terms they're comfortable with based on their knowledge of the grandchild's situation and future earning potential. Many families set up lower payments during school years with a balloon adjustment after graduation when income increases. The biggest tax advantage is that the grandparents can spread any capital gains across multiple years rather than recognizing it all in one tax year, potentially keeping them in a lower tax bracket. Meanwhile, the grandchild can still deduct the mortgage interest just like with a traditional mortgage.

Couldn't they just use a life estate deed? That way the grandparents retain the right to live in the property until death, but ownership transfers automatically at death - getting the step-up in basis benefit while still guaranteeing the property goes to the grandchild?

A life estate deed is definitely worth considering, but it has some limitations. While it does allow for the step-up in basis at death and avoids probate, there are a few important considerations: The grandparents in this case don't actually live in the property (OP mentioned it's their "2nd house"), so a traditional life estate might not make sense. Instead, they might consider a remainder interest deed with retained right of sale, which would still provide the step-up in basis while giving them flexibility. Another potential issue is that creating a life estate now could trigger gift tax consequences on the remainder interest (the portion effectively being given to the grandchild). The IRS has specific formulas to calculate the present value of that remainder interest based on the life expectant's age. Also worth noting that with a life estate, the original owners can't sell or mortgage the property without the remainder beneficiary's consent, which may or may not be desirable depending on the grandparents' future needs.