Thanks for bringing this up! Do you know if I need any special documentation to prove the building-to-land ratio I use? And would it be better to use the ratio from when I purchased or from when I converted to a rental?

You don't need special documentation, but you should keep records of how you determined the ratio. The property tax assessment is generally considered reasonable support if the IRS ever questions it. You should use the ratio that applies at the time of conversion to rental use, not the original purchase. The ratio could change over time as land and building values appreciate at different rates.

I used TurboTax last year for my converted rental. It walks you through the process step by step and asks all the right questions about purchase price, FMV at conversion, and building/land allocation. Just make sure you have all your documentation ready before you start.

Does this apply even if you use one of those tax relief companies that advertise on radio? They always claim they can settle for "pennies on the dollar" but I assume that's just marketing hype?

Those "pennies on the dollar" claims are extremely misleading. What those companies are referring to is the IRS Offer in Compromise program, which is only available in very specific hardship situations where you genuinely cannot pay your tax debt. You have to prove significant financial hardship, and most people who apply get rejected. Those companies charge thousands in fees for something you can do yourself, and they often make promises they can't keep. They can't get any better deal from the IRS than you can get yourself. And yes, even with an accepted Offer in Compromise, the IRS will still apply interest to your original tax debt before determining your settlement amount.

Did you have to fill out any special forms for the penalty abatement? Or was it just handled over the phone?

7 Is there any downside to just filing an amendment anyway, even for these small issues? I always prefer to have everything 100% accurate, even if it's something minor.

19 There's no significant downside to filing an amendment if it gives you peace of mind. It's easy enough to do - just check the "amended" box on the form and explain the corrections in the comments section. That said, it's important to maintain perspective about what these forms are for. They're designed to track significant foreign assets, not to trap people over typos or minor administrative details. In my years of practice, I never saw the IRS pursue anyone for good-faith mistakes of the type you're describing. Your time might be better spent ensuring your current and future filings are accurate.

14 This seems like dangerous advice tbh. The penalties for FBAR violations can be insanely high. Isn't it better to be safe than sorry?

It's notable because with all the recent Fed changes, people were expecting the IRS rates to change too. The fact that they're keeping them stable suggests they believe the current economic conditions and inflation outlook are stable. For taxpayers who have payment plans or are dealing with back taxes, any change in these rates can significantly impact how much they end up paying over time. For example, I've been paying down a tax debt from 2022, and a 1% rate change would affect my total cost by hundreds of dollars.

That makes sense, thanks for explaining. I hadn't made the connection to the Fed rate changes. I guess it's good news for anyone with payment plans since the rate isn't going up. My friend has been paying off a pretty substantial tax bill from a few years ago, so I'll let him know the rate is holding steady. He's been worried about the possibility of increases making his payment plan more expensive.

Does setting up a payment plan affect your credit score? I might need to do this this year but I'm also trying to buy a house soon and don't want anything negative on my credit report.

Do they handle both the 5498-SA and 1099-SA forms? I have both because I contributed to my HSA and took distributions in the same year.

Yes, they handle both forms. The 5498-SA (which shows your contributions) and the 1099-SA (which shows distributions) are both covered in their free federal filing. They use Form 8889 to reconcile everything related to your HSA. You'll see a specific section for HSA accounts where you can enter both your contributions and distributions. Just make sure you have your 1099-SA handy to enter the distribution amount and the correct box number (usually Box 1 shows total distributions, and Box 2 shows earnings on excess contributions if applicable).

Ouch! Did you have to pay a lot? I'm paranoid about this because I used my HSA card at a pharmacy where I bought both prescription meds and some other non-medical stuff on the same transaction.