This is super helpful advice. You can get the wage and income transcript online through the IRS website if you set up an account. I had to do this when I lost my 1099s from 2020 while moving.

Thanks for adding that context! Yes, that's exactly why I'm doing MFS - to keep my income-based payments manageable. I've done the math and even with losing some tax benefits, the monthly payment reduction over the year saves me more. Do you know if using TurboTax makes it easy to compare both scenarios before finalizing?

Yes, TurboTax makes it fairly easy to compare both scenarios. You can actually prepare your return both ways (filing jointly and filing separately) before you file to see the difference in tax liability. The software has a feature called "What If" scenarios where you can see how different choices affect your refund. You might need the Deluxe version or higher to access this, but it's worth it for your situation. Just remember to look at the total annual impact - combining both the tax difference and the student loan payment savings over 12 months to determine which filing status truly benefits you more.

Yeah, this is important! The tax penalties for MFS can be significant. You lose the student loan interest deduction, education credits, child and dependent care credit, and often have lower income thresholds for deductions and credits. Plus, if one spouse itemizes, the other MUST itemize too, even if taking the standard deduction would be better.

What exactly qualifies as Section 1231 property? And does this still apply if the assets are fully depreciated?

Section 1231 property includes depreciable property used in a trade or business that's held for more than one year. So your DJ equipment would typically qualify if you've owned it for more than a year, which it sounds like you have. Even fully depreciated assets can still benefit from Section 1231 treatment. The fact that they're fully depreciated just means your basis is zero (or close to it), but the character of the gain can still benefit from potentially favorable capital gain treatment. However, be aware that depreciation recapture rules may cause some or all of the gain to be treated as ordinary income anyway, particularly with personal property like equipment.

What tax software were you using? I'm using TurboTax and wondering if it handles this situation correctly or if I need something more specialized.

I was using H&R Block online, which I normally find pretty good for my basic tax needs. The problem wasn't really the software itself - it was that I didn't understand all the forms and steps needed for proper business dissolution. I missed filing Form 4797 for reporting the sale of business assets, and didn't properly document the conversion of business assets to personal use. No tax software can really help you make the strategic decisions about WHEN to sell assets versus when to convert them - it just processes the information you give it. That's why I suggest getting professional help for at least one session to map out your strategy before you start entering things into tax software.

That's a great idea about asking for a sample pay stub! I didn't even think of that. Are HSA contributions similar to 401k in how they affect taxes? And do you know if parking deductions are pre-tax or post-tax?

HSA contributions are even better than 401k contributions tax-wise. They're pre-tax when made through payroll deduction, they grow tax-free, AND withdrawals are tax-free when used for qualified medical expenses. It's the only triple tax advantage account available. Definitely max it out if you have a High Deductible Health Plan. Parking and transit benefits are typically pre-tax up to the IRS limit (around $280/month for 2025), but it depends on whether your employer has set up a qualified transportation benefit program. Some smaller employers might just provide a taxable parking stipend instead. Definitely worth asking HR about the specifics of their program.

This is good advice but your math is a bit off. 65000/26 is actually $2,500 (not $2,400). Also, federal tax will probably be lower than 15% effective rate on $65k, especially with 401k contributions reducing taxable income.

Would filing a police report actually help speed up the resolution with the IRS? And should I file it in my local jurisdiction even if I have no idea where the identity theft occurred?

Filing a police report won't necessarily speed up the IRS process, but it creates an official record of the crime that strengthens your case with both the IRS and credit bureaus. It demonstrates you're taking legal steps to address the fraud, which can be important if there are any questions about the legitimacy of your claim. Yes, file the report with your local police department where you live. They understand that identity theft can happen anywhere, and they're required to take the report even if the actual crime might have occurred elsewhere. Ask for a copy of the report or at minimum the report number to include with your IRS documentation.

You definitely need to contact your state tax agency separately! I made the mistake of thinking the IRS would handle everything, but states have their own identity theft processes. When I finally contacted my state revenue department, I found out someone had also filed a fraudulent state return in my name and I had to go through a whole separate verification process.

Thanks for letting me know! I'll contact my state tax department right away. Did you need to submit the same documentation to them that you did to the IRS, or do they have different requirements?