That's a really good point about the timing! My school definitely billed for spring semester in December, even though I didn't actually pay until January. So the 1098-T might not match up perfectly with the calendar year I need to report on. Do you know if room and board count as qualified expenses too?

Room and board do NOT count as qualified education expenses for determining the taxable portion of scholarships and grants. Only tuition, fees, and required course materials count. That's actually a common misconception that trips up a lot of students. So if your scholarship/grant money was used for housing and meals, that portion is generally taxable income, even if it's part of your official Cost of Attendance from the school.

It's not about the amount as much as it is about accuracy. The IRS gets a copy of the 1098-T, so they know about the educational payments. Depending on OP's overall situation, that $1600 could push them into a different tax bracket or affect other credits.

Which state are you in? I'm in California and haven't even looked into the state requirements yet. Do you file W2s with the state tax agency separately?

I'm in New York, but most states have their own requirements. In California, you'd need to submit your W-2s to the Employment Development Department (EDD), not just the federal SSA. California actually has some of the stricter penalties for late filing - they can charge $50 per W-2 plus potentially 10% of the tax that was withheld if you're very late. Their deadline is the same as the federal one (January 31st), but the submission process is completely separate. Check the California EDD website for their specific filing instructions.

Are those services expensive? I only have 2 part-time employees and do everything manually because I thought payroll services were overkill.

Does receiving the K-1 automatically make you a "material participant" in the business? I'm in a similar situation with a family business and don't know if I can claim the losses.

No, receiving a K-1 does not automatically make you a material participant. Material participation is determined by how much time and effort you put into the activity. There are seven tests for material participation in IRS Publication 925, but generally you need to work 500+ hours in the activity during the year to be considered a material participant. For rental activities specifically, they're automatically considered passive regardless of your participation hours, unless you qualify as a real estate professional (which requires 750+ hours in real estate activities and more time in real estate than any other occupation).

Yes, rental losses can affect your QBI (Qualified Business Income) deduction. Under Section 199A, QBI is calculated for each business activity and can be reduced by losses. If your rental activity is considered a qualified trade or business (which depends on several factors), the net loss would result in no QBI deduction for that activity. Additionally, net losses from qualified businesses can offset QBI from other profitable qualified businesses, potentially reducing your overall QBI deduction. It gets complicated quickly, which is why tracking these losses properly is so important.

Thank you for this suggestion. I did actually meet with HR yesterday and showed them that I've started the process. They were more understanding than my direct manager and said they mainly need to see proof that I've engaged with a tax professional and have a concrete plan. Did you use a special type of tax person for your situation? I'm wondering if I need someone who specializes in delinquent returns.

I used an Enrolled Agent who specialized in tax resolution and delinquent returns. They tend to be more affordable than CPAs while still having full representation rights with the IRS. The key is finding someone who regularly handles past-due filings rather than just normal tax prep. I recommend asking specifically about their experience with employment verification issues and their typical timeline for preparing delinquent returns. My EA was able to provide a formal letter stating I had retained their services and outlining our filing plan, which satisfied my employer while we completed the actual work. Most tax pros who work in this area understand the employment implications and can help document your progress for HR.

This is so important! I had the same issue with state taxes being overlooked. And if you had self-employment income, some cities and local jurisdictions also require tax filings. For example, I had to file a city income tax return for my freelance work that I didn't even know existed until I got a notice.

This is super helpful! I like your approach with the business name format. One follow-up question - when you split the Schedule Cs between spouses, do you also split the expenses proportionally? Or can one spouse claim certain categories of expenses while the other claims different ones?

I split both income and expenses proportionally based on our work contribution percentage. So if we're doing a 60/40 split, each Schedule C shows that percentage of both the revenue and expenses. You could technically allocate specific expense categories to each spouse if those expenses directly relate to their specific duties, but that gets messy and might invite more scrutiny. The proportional approach is simpler and generally easier to defend if questioned.

Rev. Proc. 2002-69 is specifically about community property states, which OP mentioned they're not in. It allows married couples in community property states to treat their wholly-owned LLC as either a disregarded entity or partnership. Since OP is in a non-community property state, this wouldn't apply directly to their situation.