That's an interesting point about retirement contributions! We do contribute to our 401ks but definitely not maxing them out. How much difference did that make in your tax situation? And no, we don't have any 1099 income - just our regular W-2 jobs.

For us, maxing out our 401ks made a huge difference. At your income level, it could save you around $8,000-10,000 in taxes annually depending on your tax bracket. When we went from contributing about 6% to the max (which is $22,500 per person for 2023), our withholding issues disappeared. It effectively reduced our taxable income by about $35,000 combined. It was a bit of a lifestyle adjustment to put that much away, but the tax savings plus the long-term retirement benefits made it worthwhile. And honestly, once it's automatically deducted, you adjust your spending and barely notice it.

This! I'm in NY and had the same issue. The state withholding tables don't always scale correctly with the federal ones, especially for dual-income households in high tax states.

Thanks for the clear explanation. I definitely don't want to do anything that would trigger an audit. Do you know if these carried forward losses have any time limit? Like if I keep the property for another 10 years, can I still use these losses when I eventually sell?

There is no time limit on carried forward passive losses. You can continue to carry them forward indefinitely until you either have passive income to offset them against or until you dispose of the property in a taxable transaction. When you eventually sell the property, you'll be able to use all accumulated passive losses against any type of income (not just passive income). This is one of the benefits of holding real estate long-term - those suspended losses can create a nice tax break when you ultimately sell the property, even if it's 10, 20, or more years down the road.

How do you tell the difference between a repair and an improvement? I replaced my water heater last year and wasn't sure how to classify it.

Thank you for this advice. We made an appointment with a tax preparer for tomorrow to get last year's return filed properly. Do you know if we should wait to contact the IRS until after we've filed that missing return, or should we call them now to try to put a hold on the CP504?

I would contact the IRS immediately about the CP504, even before the tax return is completed. Let them know you're actively working on filing the missing return and have an appointment scheduled. Request a temporary hold on collection activities while you get everything in order. When you call, be prepared with your boyfriend's financial information because they might ask about his current income and expenses to determine what kind of payment arrangement is appropriate. The missing return is important, but addressing the immediate levy threat should be your first priority.

How much did they take from his paycheck? Is it like a fixed amount or a percentage?

Thanks for bringing up the cost basis point! Do you know if I need to track each batch of dividend shares separately for when I eventually sell? Like if I get quarterly stock dividends, do I need to track 4 different lots with different cost bases?

Yes, you should definitely track each distribution as a separate lot with its own cost basis and acquisition date. This becomes important when you sell, as you'll want to identify which specific shares you're selling to optimize your tax situation. Most brokers these days track this automatically in their systems, but it's good practice to keep your own records as well. I use a simple spreadsheet with distribution dates, number of shares, price per share on that date, and total value. It takes a little effort, but it makes tax time much easier, especially if you hold these investments for many years.

My broker does the same thing. I round to 3 decimal places for my records and it hasn't been an issue. The IRS isn't going to come after you for rounding $50.175 to $50.18 on your taxes. Just make sure your total dividend income for the year is reasonably accurate.

I actually hadn't thought to check the partnership agreement for that. I inherited this share and just kind of accepted what I was told. Is this something that would be obvious in the agreement or would it be buried in legal language?

It would typically be in a section about "Distributions" or "Tax Matters." It might use language like "The Partnership shall make distributions to Partners in amounts at least sufficient to cover their tax liabilities resulting from allocated Partnership income." If you can't find your copy of the agreement, you should request one from the management company. Even without a specific tax distribution provision, you could try negotiating with the other partners. Sometimes partnerships can do special tax distributions even without a formal requirement if all partners agree.

Selling a minority interest in a private partnership can be really difficult though. I tried to sell my share in a similar situation and the discounts were ridiculous - like 70% below what I thought it was worth based on the underlying real estate.