


Ask the community...
One thing nobody's mentioned yet - make sure you're allocating expenses properly if you lived in the condo for part of December before moving to your new primary residence. You can only deduct expenses from the period when the property was held for rental purposes. Also, regarding the new flooring, if it was installed while you were still using it as your primary residence, before you made it available for rent, you might have to treat it differently. The timing matters a lot here.
That's a good point I hadn't considered! I actually moved out completely in late November, and the flooring work was completed in early December before I signed with the property management company on December 15th. Would that affect how the flooring is treated? And would the HOA fees for December be fully deductible then?
Since you moved out in late November and the flooring was installed in early December before signing with the property management company, that timing actually helps your case. The flooring work was done while the property was being prepared for rental use, not while you were using it as a personal residence. The HOA fees for December would likely be fully deductible since the property was no longer your personal residence during that month. Just make sure you have documentation showing you had moved out in November and that the property was being prepared for rental use in December. The property management agreement from December 15th is excellent supporting documentation of your intent to rent the property.
Don't forget about the possible passive activity loss limitations. If your adjusted gross income is under $100k, you can deduct up to $25,000 in passive rental losses against other income. This phases out as your AGI increases from $100k to $150k. If your AGI is over $150k, you generally can't deduct rental losses against other income - they get carried forward to future years.
This is super important! I got hit with this last year when I couldn't deduct my rental losses because my income was too high. The carry-forward helped eventually, but it wasn't what I expected when filing that first year with the rental property. Also, doesn't the fact that OP is actively participating in rental management affect this? Or does using a property management company automatically make it non-active participation?
Just want to add that I was in this exact situation in 2019. I forgot to include a W-2 from a 2-month contract job, realized it the next year, and decided to just "let it slide" because the difference was only about $300. BIG MISTAKE. The IRS sent me a notice almost exactly 18 months later. By that time, with interest and the late payment penalty, I ended up owing almost $450 instead. Plus it was super stressful getting that IRS letter. If I could go back, I would have just filed the amended return right away.
Thanks for sharing your experience. This is exactly what I was worried about. I think I'm going to go ahead and file the amended return this week. Better to just deal with it now than have it hanging over my head.
Good call! It's definitely the smart move. The peace of mind alone is worth it. And like others have mentioned, the penalties are usually much less severe (or even waived completely) when you correct the issue yourself instead of waiting for them to find it.
Don't freak out but definitely fix it. IRS has a First Time Penalty Abatement program if this is ur first time making a mistake like this. Just file the 1040-X, pay what u owe, and include a letter requesting "first time penalty abatement" explaining it was an honest mistake. Worked for me last yr!
Can confirm this works! First Time Penalty Abatement saved me about $200 in penalties when I messed up some 1099 income reporting two years ago. You just need a clean compliance history for the past 3 years.
The one thing nobody has mentioned yet is to check that whoever you hire has experience with YOUR SPECIFIC type of audit. There are different kinds: - Correspondence audit (mail only) - Office audit (you go to IRS office) - Field audit (they come to you - the most serious) My brother hired an expensive tax attorney for what turned out to be a simple correspondence audit that an EA could have handled for half the price. Meanwhile, I had a field audit for my construction business and definitely needed the attorney because they found some serious issues. Also ask about their audit success rate! A good representative should be able to tell you what percentage of their audit cases result in reduced or no additional tax owed.
One approach nobody's mentioned - I used a COMBINATION when I was audited last year. I started with an EA who handled most of the basic documentation and preparation, then brought in a tax attorney specifically for negotiating the final settlement when it looked like penalties might be applied. The EA charged $200/hr and handled about 80% of the work. The attorney was $450/hr but only needed for about 5 hours total. This "tiered approach" saved me money while still getting specialized help when needed. For what it's worth, in my experience: - EAs know the tax code extremely well and are great for most audit situations - CPAs are best when there are complex accounting issues beyond just tax - Tax attorneys are essential if there's any hint of penalties, fraud accusations, or if you need attorney-client privilege protection Don't be afraid to ask any professional if your situation might benefit from a combined approach!
Don't forget streaming subscriptions if you're reviewing content! I deduct my Netflix, Disney+, etc. since I make review videos. Also, if you're filming at home, you might qualify for the home office deduction for the space used exclusively for your YouTube activities. My tax guy says documenting everything is key - take photos of your workspace and keep a log of what equipment is used for which videos.
Thanks for mentioning the streaming services - I hadn't even thought about that! I do occasionally break down scenes from movies to explain the engineering concepts they got wrong. For the home office deduction, does it matter if it's just a corner of my living room with my filming setup, or does it need to be an entirely separate room?
For the home office deduction to work properly, the space needs to be used exclusively for your business. A corner of your living room is trickier because it's not exclusively a business space. The IRS really looks for a separate area that's only for business use. What some content creators do is create a clearly defined studio space, even if it's within a larger room, and ensure that particular area is only ever used for content creation. Taking photos that show the clear boundary between personal and business space can help document this. Just be aware that the home office deduction is one that can trigger extra scrutiny, so make sure your documentation is solid.
Quick tip for new content creators: Start tracking everything NOW even if you think you won't make money for a while. I missed out on thousands in deductions my first year because I didn't save receipts for my early equipment purchases. The IRS allows deductions for startup costs even before you make your first dollar!
Abigail Patel
Grad student here - I've been filing with 1042-S forms for 3 years now. If you're a tax resident (the substantial presence test applies after 5 years for most student visas), you should treat your 1042-S fellowship income similar to how you'd report scholarship/fellowship income on a 1098-T. Important distinction: For tax residents, the scholarship/fellowship portion used for tuition and required fees is non-taxable, but amounts used for living expenses are taxable. This is different from non-resident treatment.
0 coins
Edwards Hugo
ā¢Thanks for this info! My 1042-S doesn't seem to distinguish between amounts for tuition vs. living expenses - it just has a total in Box 2. How do I determine which portion is taxable vs. non-taxable? Do I need to get additional documentation from my university?
0 coins
Abigail Patel
ā¢You'll need to look at your student account statement from your university to see the breakdown. The university doesn't typically distinguish this on the 1042-S itself. Compare your total qualified educational expenses (tuition, required fees, but NOT room and board) against the total fellowship amount. Any amount of your fellowship that went toward qualified expenses can be excluded from taxable income, while the remainder (often your stipend for living expenses) is taxable. Your university's financial aid office or international student office should be able to provide the necessary documentation showing this breakdown if you don't already have it.
0 coins
Daniel White
Has anyone tried using TurboTax for 1042-S reporting? FreeTaxUSA is giving me headaches with my fellowship income.
0 coins
Nolan Carter
ā¢I used TurboTax last year for my 1042-S and it was better than FreeTaxUSA but still not ideal. You have to enter it under "Less Common Income" then "Other Reportable Income" and then manually type in the details. They still don't have a dedicated form for it, but at least the interview process walks you through it a bit more clearly than FreeTaxUSA.
0 coins