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 Rev Proc 2013-30 actually work though? I've read horror stories about people thinking they qualified for relief but then getting rejected.

It absolutely works, but you have to make sure you meet ALL the requirements. The most important is that your shareholders (which is just you if you're a single-member LLC) have filed their personal returns consistent with S-corp status. That means if you're trying to get S-corp status for 2023 after the deadline, you'd need to have filed your 2023 personal return as if you were an S-corp owner (reporting K-1 income, not Schedule C). The IRS is actually pretty lenient with this relief procedure for small businesses. I submitted mine with a simple statement explaining I didn't understand the election timing requirements, and it was approved without any questions.

What's a "reasonable salary" though? I've heard everything from 30% to 70% of profits and I'm confused about what's actually required.

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?

Thanks for mentioning the EIC! I make about $42,000 a year as a dental assistant, would that income level qualify me for the Earned Income Credit with two dependents? And I actually did pay for some doctor visits and prescriptions for my niece when she got strep throat this year, so I'll definitely save those receipts.

Yes, with an income of $42,000 and two qualifying dependents (your daughter and niece), you should qualify for some amount of Earned Income Credit. For 2024, the income limit for EIC with two qualifying children is around $55,000 for a single filer or head of household, so you're well within the range. Definitely keep those medical receipts! While you might not exceed the 7.5% AGI threshold for medical deductions, it's always good to track everything. Also, don't forget about any education expenses for both children - there might be credits available for those as well, like the American Opportunity Credit or Lifetime Learning Credit when they're older.

This happened to my brother and his ex-wife! Both claimed their daughter and it was a MESS. His refund was delayed for months while the IRS sorted it out. They even had to submit additional documentation to prove who provided the most support.

Exactly! And what makes it worse is that these conflicts can trigger correspondence audits which can delay refunds by months. The IRS typically sends notices to both parties asking for proof of eligibility to claim the dependent. The person who doesn't have the right to claim the dependent but filed first can cause major headaches for the rightful claimant. That's why it's so important to have that conversation early and get something in writing, even if it's just a simple signed statement that can be kept with tax records.

That's a great point about documentation - I hadn't considered how much more scrutiny a luxury vehicle might get. Do you think it matters if I use actual expenses vs. standard mileage rate when it comes to audit risk? And were there specific record-keeping issues the IRS focused on during your audit?

In my experience, using actual expenses (like you'd need to do for depreciation) definitely increased the scrutiny compared to standard mileage rate. The IRS agent specifically told me that luxury vehicles using actual expense method are flagged more frequently. During the audit, they focused heavily on three things: 1) Contemporaneous mileage logs (they wanted to see that I recorded trips when they happened, not recreated later), 2) Documentation of business purpose for each trip, and 3) Evidence that I had another vehicle for personal use. They were very skeptical of my claim that the Mercedes was 100% business when I didn't have another car in my name. My advice: keep a dedicated app or logbook in the car, document every single business trip with purpose and mileage, take periodic odometer photos, and keep all maintenance records showing the mileage progression. If you're claiming 100% business use, they'll want to see how you handle personal transportation.

Those limits seem low - is that for all vehicles or just luxury ones? I thought there were special rules for trucks and SUVs that let you deduct a lot more.