I'm going through the same thing right now! What tax software are you using? I'm on H&R Block and was confused because when I entered my 1099-K, it automatically wanted to treat it as business income on Schedule C which seems wrong for personal items.

I went through this exact same situation last year and completely understand your stress! The key thing to remember is that the 1099-K is just a reporting document - it doesn't automatically mean you owe taxes on the full amount. For personal items sold at a loss (which sounds like your situation), you'll want to report these on Form 8949 and Schedule D, not as business income. The IRS Publication 544 specifically covers sales of personal property and explains that you can use reasonable estimates for cost basis when you don't have original receipts. Here's what worked for me: I created categories for my items (electronics, clothing, books, household items, etc.) and researched what similar items would have cost when I originally bought them. I documented my methodology and kept screenshots of comparable retail prices as backup. For example, if I sold a kitchen appliance from 2015, I looked up what that model cost new in 2015 and used that as my cost basis. The most important thing is to be honest and consistent in your approach. Since you sold personal belongings rather than running a business, you're not trying to claim business deductions - you're just documenting that these sales resulted in losses, not gains. Keep good records of your estimation process and you should be fine!

This thread has been incredibly comprehensive! I'm in a very similar situation and have been putting off filing for years due to missing documentation. Reading through everyone's experiences and solutions has given me so much hope that this is actually manageable. I wanted to add one more approach that might help - if you've ever applied for any government benefits or programs (unemployment benefits, food assistance, Medicaid, etc.), those applications typically require detailed employment history and income information. I found my old unemployment application from 2021 that listed employers I'd completely forgotten about, along with their addresses and the dates I worked there. Also, if you have any old tax preparation software receipts in your email (even from years you didn't complete filing), those often contain employer information from when you started entering your data. I found a TurboTax receipt from 2022 that reminded me of a part-time job I'd had. The combination of all these methods - IRS transcripts, state unemployment records, old applications, VITA assistance, and document archaeology through emails and files - really does provide multiple paths to reconstruct your employment history. It's reassuring to know there are so many people who've successfully navigated this process and gotten caught up. Thanks to everyone for sharing their experiences and creating such a helpful resource for those of us trying to get our tax situations straightened out!

This thread has been an absolute goldmine of information! As someone who's also been avoiding taxes due to missing W2s, I'm finally feeling motivated to tackle this. One small addition that might help others - if you've ever had a background check for any job, apartment rental, or volunteer position, those companies (like Sterling, HireRight, etc.) sometimes keep records of the employment information you provided. I found an old background check report in my email that listed employers with dates that I'd completely forgotten about. Also, for anyone feeling overwhelmed by all these options, I'd suggest starting with the quickest free ones first: state unemployment office website, then IRS Get Transcript tool, then digging through old emails and documents. The paid options (SSA report, professional help) can be your backup if the free methods don't get you everything you need. The encouragement here about penalty relief and first-time filer understanding from the IRS has been really reassuring. It's clear that taking action to get compliant is always better than continuing to avoid the situation, even when you're missing documentation. Thanks everyone for sharing your experiences and proving this is totally doable!

This is a really complex situation that highlights why partnership taxation is so tricky. Based on what you've described, it sounds like you're caught between two different approaches to loss allocation - one based purely on ownership percentages, and another based on economic risk. The key issue here is that partnership tax law requires loss allocations to have "substantial economic effect" under Section 704(b). This means the partner claiming the loss should actually bear the economic burden if the partnership fails. If one member is funding most operations while others take equal loss allocations, that can create problems. Your negative capital account might actually be less concerning than it appears. What really matters for your ability to deduct losses is your "outside basis" - which includes your capital contributions plus your share of partnership liabilities. Even with a negative capital account, you might still have positive basis if the partnership has debt allocated to you. A few questions that might help clarify your situation: - Does the partnership have any loans or debt that would be allocated among partners? - What does your partnership agreement say about loss allocation and capital account maintenance? - Are there any guarantee provisions or deficit restoration requirements? Given the complexity and the fact that you're getting conflicting advice from CPAs, you might want to consider getting a third opinion from someone who specializes in partnership taxation. The difference between the two approaches could have significant implications for both current and prior year returns.

I've been following this thread and wanted to add something that might help clarify the situation. When you have a partnership where one member is providing most of the funding but losses are being allocated based on ownership percentages, you're essentially dealing with what the IRS calls "artificial" loss allocations. The new CPA is likely applying the "at-risk" rules under Section 465, which limit loss deductions to amounts you actually have at risk in the activity. This is separate from but related to the substantial economic effect rules others have mentioned. Here's what might have happened: Your old CPA was mechanically following the partnership agreement (allocate by ownership %), but didn't consider whether you actually had sufficient basis or were "at-risk" for those losses. The new CPA is applying the proper limitations. The good news is that if you couldn't deduct losses in prior years due to insufficient basis or at-risk amounts, those losses don't disappear - they get suspended and can potentially be used in future years when you have sufficient basis. Given the complexity here, I'd strongly recommend asking the new CPA to prepare a multi-year basis and at-risk limitation worksheet showing: 1. Your beginning and ending basis for each year 2. Your at-risk amounts 3. Which losses were properly deductible vs. suspended 4. Current suspended loss carryforwards This will help you understand exactly where you stand and whether any prior year amendments are needed.

Has your friend contacted QuickBooks Payroll support directly? I had a similar issue and discovered that QuickBooks actually has a tax resolution team specifically for these situations. Since he's been using QuickBooks Payroll, they should have records of all the calculated taxes even if they weren't paid. Their tax specialists can generate all the necessary documentation showing what's owed for each period, which makes setting up a payment plan with the IRS much easier. In my case, they even helped connect me with the right IRS department and provided guidance on which forms to file. Might be worth a call to them before trying some of the more expensive options.

I've been following this thread and wanted to add one more option that hasn't been mentioned yet - your friend can also make federal payroll tax payments by wire transfer directly to the IRS Treasury account. This completely bypasses EFTPS and the PIN requirement. He'll need to contact his bank's wire department and provide them with the IRS Treasury routing number (which varies by region) and account number, along with his EIN and tax period information. Most banks can process same-day wire transfers for tax payments, though there's usually a fee ($15-30). This is actually the fastest way to get payments posted to his account while dealing with the PIN situation. The IRS processes wire transfers within 1-2 business days, and it immediately stops additional penalties from accruing on the paid amounts. For the $45K total, I'd also strongly recommend he request penalty abatement under "reasonable cause" provisions. The fact that he's been actively trying to resolve this since January and the IRS hasn't processed his address change or PIN request should qualify. Form 843 is what he needs, and he should include documentation of all his attempts to contact the IRS and resolve the issue. Given the amount involved, the multi-pronged approach several people mentioned makes sense - wire transfer for immediate payments, Taxpayer Advocate Service for the systemic issues, and penalty abatement for the accumulated charges.

I've been following this thread with great interest as someone who's dealt with similar LLC partnership tax confusion. What strikes me most is how many CPAs seem to give blanket advice about "all LLC members paying SE tax" without properly considering material participation rules. For anyone still working through this issue, I'd recommend being very specific when discussing your situation with tax professionals. Ask them directly about the seven material participation tests under IRC Section 469 and how they apply to your LLC members. If they can't explain these tests clearly, that's a red flag that they may not be the right fit for partnership taxation. One additional point I haven't seen mentioned - if you're using business credit cards or financial accounts, make sure to review who's actually authorized on these accounts. Having only the active partner as an authorized user on business accounts is another piece of documentation that supports the material participation difference. The amendment success stories shared here are really encouraging. It's clear that when the facts strongly support non-participation (like having zero business-related activities, communications, or decision-making involvement), the IRS amendments process can work smoothly and result in significant refunds. Thanks to everyone for sharing such detailed experiences - this thread should be bookmarked by anyone dealing with LLC partnership SE tax questions!

This thread has been absolutely incredible to follow! As someone who just started an LLC with my brother last year (I handle all operations, he's purely a financial investor), I've learned more from reading these real experiences than from months of trying to decipher tax guides online. The material participation angle completely changes how I'm thinking about our tax situation. Our CPA told us the same thing - "both LLC members need to pay self-employment tax" - but now I'm realizing that might not be correct for our situation since my brother doesn't participate in any business activities whatsoever. What really opened my eyes was Mohammed's explanation of the seven material participation tests under IRC Section 469. I had never heard of these before, but it makes perfect sense that there would be specific criteria for determining who actually needs to pay SE tax based on their level of involvement. I'm planning to follow the roadmap that several people have outlined here: review our operating agreement, consult with a partnership tax specialist, and potentially amend our 2023 return. The documentation aspect that everyone keeps mentioning shouldn't be an issue since my brother has literally zero business footprint - no emails, no client interactions, no access to any business systems. Thanks to everyone who shared their amendment success stories and savings amounts. It's really motivating to know that correcting this issue can result in substantial refunds. This community discussion has been far more helpful than any generic tax advice I've found elsewhere!