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.

For 2024 taxes (filed in 2025), the Child and Dependent Care Credit allows you to claim up to $3,000 in expenses for one child or $6,000 for two or more dependents. The credit percentage ranges from 20-35% of those expenses depending on your income. The percentage decreases as your income increases, with the 35% rate applying to those with AGI below $15,000. For most middle-income families, you'll get 20% of your qualifying expenses. Since you spent $8,400, you'd be limited to claiming the $3,000 maximum for one child. At the 20% rate, that would be a $600 credit. This is a non-refundable credit, so it can only reduce taxes you owe to zero, not generate a refund beyond that.

Thank you so much for explaining! That makes way more sense now. So basically even though I spent $8,400, I can only claim $3,000 of it, and then I get 20% of that amount as an actual credit on my taxes. That's much less than I was hoping for, but at least it's something.

Check out the IRS Free File program. If your AGI is under $73,000, you can file federal taxes for free. The Free File Alliance has different providers, and some even offer free state filing too. TaxAct, TaxSlayer, and 1040Now are usually good options. Make sure you go through the IRS website (irs.gov/freefile) to access the truly free versions. If you go directly to the company websites, they often push you toward paid versions.

How did they catch him? Was it also through payment apps or did someone report him?

It was actually through social media. He was advertising his training services on Instagram and Facebook, and someone (probably a competitor) reported him to the IRS. They have a whistleblower program where people can report suspected tax fraud. Once they started looking into him, they found the payment app transactions didn't match his reported income. It was really stressful for him, and he ended up having to hire a tax professional to help sort everything out, which was another expense on top of the penalties.

Yes! All of that counts as business expenses. Keep your receipts though. Also track mileage if you drive to buy supplies or meet clients anywhere outside your home. That adds up fast at the current deduction rate.

Was there any trouble with the IRS beyond the financial penalties? Like did they treat you differently or make things harder because you skipped filing?

No actual trouble beyond the financial hit, but they did put me on a shorter leash for a few years. They processed my refunds more slowly the next couple years and seemed to scrutinize my returns more carefully. I also couldn't qualify for their streamlined payment plans for a while - had to provide more financial documentation. The biggest issue was honestly just the unnecessary stress and the fact that I ended up paying more than double what I would have if I'd just filed on time and set up a payment plan from the start. The interest and penalties stack up way faster than most credit cards.

This is actually not a terrible idea if you can qualify for a 0% intro APR card. I did this last year - got a card with 15 months at 0%, paid my taxes, then focused on paying off the card before the intro period ended. Saved me a bunch compared to the IRS installment plan interest rates.

That's a really good point! How do you figure out the right amount for state though? Is there a calculator similar to the IRS withholding calculator?

Most states do have their own withholding calculators on their department of revenue or taxation websites. Just search for "[your state] withholding calculator" and you should find it. Some states like California and New York have particularly good calculators that will help you determine the right withholding amount based on your specific situation. If your state doesn't have a good calculator, a general rule of thumb is to withhold about 5-7% of your income for state taxes in high-tax states, or 3-5% in moderate-tax states, though this varies widely depending on your income level and state tax structure.

I've used https://smartasset.com/taxes/income-taxes to get a rough estimate. It's free and lets you play with different scenarios. Not super detailed but gives you a general idea of how changes affect your tax bill.