I use H&R Block and did something similar last year. The interface is different but the concept is the same. You need to create two separate K-1 forms and split the income between them. The tricky part in H&R Block is you have to manually go to the forms view and find the right schedule to enter the rental real estate portion.

Thanks for the guidance! Do I need to do anything special to make sure the basis calculations carry forward properly in H&R Block? And should I be entering any tax credits on the first or second K-1 entry?

You actually can edit the TXF file directly if you're comfortable with text editing! I tried this approach too. TXF files are basically formatted text files, and you can open them with Notepad or any text editor. Look for the sections related to your K-1, and you'll see entries for each box. You can create a duplicate of the partnership entry with a slightly different name, then remove line 2 from the original and remove everything except line 2 from the copy. It's a bit technical but doable if you're careful.

Does this mean the information my friend got last year might be outdated? He was told something about a "50% ECI test" by his previous advisor. Is that still a thing or has it changed with these new regulations you mentioned?

The good news is that the "50% ECI test" is still part of the regulations, but how it's applied and documented has evolved. Under current rules, the partnership can provide a certification that less than 50% of the gain would be effectively connected income, which may reduce withholding obligations. However, the certification process is more formalized now, with specific timing requirements (must be certified within 30 days before the transfer) and there are stricter penalties for improper certifications. The partnership needs to provide this in writing, and the documentation standards are higher than before. Also, publicly traded partnerships have different rules entirely under the current regulations. So while the basic concept remains, the implementation details have definitely changed.

Yes, unfortunately you do have to look through to the lower-tier partnerships in a tiered structure. This is one of the most complex aspects of Section 1446f compliance. The "look-through" rule requires examining each lower-tier partnership to determine if they have assets that would generate effectively connected income. Each tier needs to be analyzed separately, and the proportionate share of ECI assets needs to be calculated. This is why many sophisticated partnerships provide certifications to their partners - it's nearly impossible for a partner to make this determination without information from the partnership itself.

Thanks everyone for the help! One question though - does it matter that box 16 on my 1095-C has code 2C in it? Not sure what that means or if it affects anything?

Code 2C in box 16 on your 1095-C means you were enrolled in coverage for that month. If you actually declined coverage as you mentioned, this could be an error on your employer's form. It's worth checking with your HR department to see if this was filled out correctly. If you truly declined coverage and got a marketplace plan instead, having an incorrect code could potentially create a discrepancy in IRS records. Your employer might need to issue a corrected 1095-C with the appropriate code (likely 2F or 2G if their offer was unaffordable).

This is so important! I got hit with a huge tax bill last year because I underestimated my income and had to pay back $2300 in premium tax credits. Check line 9 on your 1095-A and make sure you reconciled that with Form 8962.

If the first employer messed up, can the employee file some kind of complaint with a labor board or something? Or is this purely a tax issue between the employee and the tax authorities?

This is primarily a tax issue between you and the tax authorities. While the employer should have withheld correctly, the actual tax liability ultimately falls on the employee. Labor boards typically don't get involved in tax withholding disputes unless there's evidence of widespread and willful mishandling of employee withholdings. Your best bet would be to contact your state's department of revenue or taxation, as they might have procedures for reporting employers who fail to properly withhold local taxes. Some jurisdictions will contact the employer directly and may waive your penalties if they determine the employer was at fault.

Reciprocity agreements are super helpful! They typically exist between neighboring states or cities to prevent double taxation for commuters. You should definitely check if there's an agreement between your home city and the city where your husband's employers are located.

Does it handle tips well? My dog walking clients sometimes tip in cash and sometimes in the app, and I'm worried about mixing them up. Also, is there a way to mark certain expenses as "office supplies" vs "pet supplies" so I can track which deductions are for what?

It handles tips perfectly! You can create separate income categories for "service income" and "tips" and then further categorize as "cash tips" vs "app tips" if you want that level of detail. This makes it easy to reconcile against what shows on your 1099 vs. what you received in cash. For expenses, yes, you can create custom categories beyond the standard ones. I have categories for "cleaning supplies" and "office supplies" since they're different types of business expenses. For your situation, "pet supplies" would be a great custom category to track those specific deductions separately.

You should consider making quarterly estimated tax payments if you expect to owe $1,000 or more in taxes. For self-employment income, you need to pay both income tax and self-employment tax (15.3% for Social Security and Medicare). At $3,200 since October, you're looking at around $490 just in self-employment tax, plus whatever income tax applies based on your total annual income. If you have other income with tax withholding (like a regular job), that withholding might cover your tax obligation from pet sitting.