22 Is there a way to check if this happened? I'm not aware of owing anything, but I guess it's possible something slipped through the cracks.

11 You can usually see this on your state's "Where's My Refund" tool - it would say something like "refund offset" or "refund applied to outstanding debt" instead of just "refund issued." You can also call your state's offset program directly - most states have one that handles when refunds are diverted to pay debts. If it just says "refund issued" then it's likely not an offset issue but rather something went wrong with the deposit. Another thing to consider is if you had tax preparation fees taken out of your refund - sometimes this can cause delays or issues with the final deposit.

20 Good point, I'll give my bank a call. Though wouldn't they typically notify you if they were holding a deposit for review?

8 That's interesting. So if I had moved into the house instead of selling my share to my brother, I could have potentially sold it tax-free later? Do you know if the 2-year clock would start from when my dad passed away or would time he spent there count too?

10 The 2-year clock would start when you actually owned the house, so from the time you inherited it. Your father's time living there wouldn't count toward your ownership period. And yes, if you had moved in and lived there for at least 2 years, you could have potentially excluded up to $250,000 of gain when selling. But remember, with inherited property, your basis is stepped up to the fair market value at date of death anyway, so you'd only pay taxes on appreciation that occurred after you inherited it.

11 Good point! I live in California and don't think we have a state inheritance tax, but I'll double check. Does anyone know which states have inheritance taxes?

25 Only six states still have inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Each state has different rates and exemptions. Some exempt close relatives entirely while others have lower rates for them. If you're in California, you're right that there's no state inheritance tax there. But always good to verify based on where the property was located, not just where you live. The tax typically applies based on where the deceased person lived or where the property is located.

Do all states have annual fees for LLCs? That might be a dealbreaker for me since my side gig only makes about 8k a year.

Not all states have the same fee structure. Some have low or no annual fees, while others like California are expensive. For example, Wyoming, New Mexico, and Arizona have very low annual fees under $100. If you're only making about $8k a year, you definitely need to calculate if the fees make sense for your situation. In many cases for smaller side hustles, operating as a sole proprietor and maximizing your eligible deductions on Schedule C is the most cost-effective approach. Just make sure you have good records of all business expenses and consider getting business insurance for liability protection instead of relying on an LLC structure.

That's interesting - wouldn't both show up on the same line of your tax return though? Schedule C income is Schedule C income whether it's from an LLC or sole prop, right?

This is super helpful, thank you! I just called the estate attorney and she's going to send me copies of all the paperwork including the 1099 forms. She seemed to think it was probably a coding error too. Do you know if I need to file an amended return or is a dispute letter enough?

If you never reported this money as income on your original tax return (which you shouldn't have if it was inheritance), then you don't need to file an amended return. You just need to respond to the IRS notice with a clear explanation and documentation. Your response should include: 1) Death certificate copy, 2) Documentation showing you were a beneficiary, 3) Any incorrect 1099 forms with an explanation of why they're wrong, and 4) Documentation of the step-up basis if there were securities involved. If all this seems overwhelming, it might be worth paying a tax professional who specializes in estates for a one-time consultation.

This is a really important point. My family went through this with my grandmother's IRA. We all got distributions and ALL of it was taxable because it was a pre-tax retirement account. The step-up basis rules don't apply to IRAs and 401ks the same way they do to regular investment accounts. OP specifically mentioned it was "not an IRA" but sometimes people don't realize what type of accounts they're inheriting. If it was any type of retirement account (traditional IRA, 401k, 403b, etc.), those distributions are definitely taxable.

Thank you for bringing this up! I'm 100% sure it was a regular brokerage account and not a retirement account. I just got off the phone with the estate attorney who confirmed it was a non-retirement investment account, so it should have gotten the step-up basis treatment. She's going to send me all the documentation tomorrow, but she believes Fidelity incorrectly coded the distribution which is why the IRS thinks I owe taxes. I'll update once I know more!

This is exactly what I've been wondering. Beyond just getting my tax situation fixed, can I sue them for damages? The stress this has caused has been unbelievable. I've had trouble sleeping, my credit score dropped, and I've spent countless hours trying to fix this mess. Would small claims court be appropriate, or should I look for an attorney who works on contingency?

This case is too complex and the damages potentially too large for small claims court. You need an attorney who specializes in tax identity theft or financial fraud. Many attorneys in this field will offer a free initial consultation. The damages you could pursue include: all tax penalties and interest, compensation for credit damage, costs for credit monitoring services, time spent resolving the issue (calculated at a reasonable hourly rate), and potentially punitive damages since their actions appear willful rather than accidental. Some states also allow for statutory damages for identity theft. I'd recommend contacting your state bar association for a referral to attorneys specializing in identity theft or tax fraud. Look for someone who has experience specifically with business-related identity theft, as this is more complex than typical consumer identity theft cases.

I was strictly a volunteer. I helped at events and occasionally assisted with marketing materials, but I was never an employee, never received compensation, and had no financial authority or access to accounts. I was not an officer or board member. I just let them use my SSN temporarily to set up the Square account when they were in a rush one day, with the explicit understanding that they would immediately change it to their Tax ID.

That makes this WAY worse from a legal perspective. As someone with nonprofit experience, I can tell you that what they did borders on criminal fraud. Nonprofits have EINs (Employer Identification Numbers) specifically for financial transactions. There is NEVER a legitimate reason to use a volunteer's SSN for merchant processing.