Thanks for all the great advice everyone! So just to make sure I understand: 1) We won't owe capital gains tax on the co-op sale since we've lived there over 2 years and the profit is well under the $500k married exclusion. 2) The gift from my parents and our gift back to them are separate transactions that may require gift tax forms but probably no actual tax. Does that sound right?

Yes, that's exactly right! You won't owe any capital gains tax on the co-op sale because you meet the primary residence requirements and your gain is well below the $500,000 exclusion for married couples. As for the gifts, they're indeed separate transactions. If any single person gives more than $17,000 to another individual in a year, the giver needs to file Form 709 (Gift Tax Return). But this is just for reporting purposes - no actual tax would be due unless someone has already used up their lifetime gift exemption of over $12 million. For example, if your parents are married and gave you $75,000, they could structure it as each giving $17,000 to both you and your wife ($68,000 total) without even needing to file Form 709, with only $7,000 counting against their lifetime exemption.

Do HOA special assessments count toward basis? Our co-op had a major plumbing project and we paid about $8k in special assessments over the years.

Hmm that's interesting! So how do I know if my situation counts as "regular business" vs just "other income"? I did babysit for them for about 3 weeks but it was just while their regular childcare was unavailable.

It comes down to whether you're in the "trade or business" of babysitting. If this was a one-off situation where you were helping out a family temporarily with no intention of continuing to offer babysitting services to the general public, you could make a case for "other income." But if you advertise your services, do this for multiple families, or plan to continue babysitting regularly, the IRS would likely consider it self-employment. Since you mentioned it was just for a few weeks during a specific situation, it sounds more like "other income" to me, but this is definitely a gray area where reasonable people disagree.

This is terrible advice. Venmo now reports transactions to the IRS if you receive more than $600 in payments for goods and services. Plus not reporting income is literally tax evasion.

Venmo only reports if you have a business account or mark the payments as goods and services. Regular personal payments aren't reported. And let's be real, the IRS isn't coming after babysitters making a few hundred bucks. They want the big fish.

Thanks for mentioning Form 2553! I did file that when I set up the business last year, so that part is covered. I do have an ITIN already, so that's taken care of too. Do you know if there are any state-specific forms I should be aware of too? My LLC is registered in Florida if that helps.

Good that you've already filed Form 2553 and have your ITIN! For Florida, you're actually in luck - Florida doesn't have a state income tax, so you won't need to file a state equivalent of the 1120-S. However, you will still need to file an annual report for your LLC with the Florida Department of State to maintain your good standing. That's done through Sunbiz.org and is separate from your tax obligations. Just make sure you're keeping good records of your business expenses versus personal expenses since that separation is even more important with an S-Corp election. The IRS tends to scrutinize single-member LLCs with S-Corp status, particularly around the reasonable salary issue.

TurboTax doesn't handle Form 1120-S in their regular versions. You'd need TurboTax Business, which is their most expensive version, and even then it can be tricky for S-Corps. I've found that for S-Corps, even single-member ones, it's worth using either a dedicated tax pro or something like UltraTax or Lacerte, which are professional-grade software. The complexity with S-Corps comes with making sure you're handling the reasonable compensation requirements correctly and properly allocating between salary and distributions. Software helps, but understanding the concepts is more important.

Thanks for the info! Sounds like TurboTax Business might be overkill for my small S-Corp. I might look into those other options you mentioned or maybe just hire a tax pro for the first year until I understand the process better. It's a lot more complicated than I thought going from a simple 1040 to all these business forms!

If you know someone hasn't been paying taxes for years, can you report them anonymously? Asking for a neighbor who brags about this constantly while driving his new boat...

Yes, you can report suspected tax fraud using IRS Form 3949-A, or by calling the IRS Tax Fraud Hotline. These reports are kept confidential, and you can submit them anonymously, though providing your information might help if the IRS needs clarification (they won't disclose your identity to the person you're reporting). That said, be careful about reporting based solely on someone's bragging. Sometimes people who talk about "not paying taxes" are exaggerating or might actually mean they found legal deductions that reduced their tax bill to zero. The IRS has limited resources and false reports can waste those resources. But if your neighbor is clearly living beyond their means while claiming to evade taxes, that combination of factors might interest the IRS.

So what happens if you file but don't pay for several years? Do they eventually garnish wages or just keep sending letters forever?

Thanks for mentioning this! We actually have the option for both traditional and Roth 401k at our jobs. Sounds like with our income level, traditional might make more sense since we don't qualify for Form 8880 anyway?

Thanks for clarifying that! I've been trying to decide between traditional and Roth for my 401k contributions. My second question - does Massachusetts treat 401k contributions differently than the federal government for state income tax purposes?

This is a great point! I think a lot of people miss this. Increasing your traditional 401k contributions can sometimes make you eligible for other credits and deductions that have income limitations, not just potentially the Saver's Credit.