Wait, I thought the Tax Cuts and Jobs Act eliminated unreimbursed employee business expenses completely for 2018-2025? Aren't we unable to claim those right now?

You're absolutely right, and I apologize for the misinformation. The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions subject to the 2% floor (including unreimbursed employee business expenses) for tax years 2018 through 2025. That's a really important correction - so currently the work-related education expenses would only be deductible if you're self-employed or if your employer reimburses you through an accountable plan. For employees paying out of pocket, the options are much more limited now until those provisions possibly return after 2025.

The Lifetime Learning Credit phases out at higher income levels though, right? I think around $80k for singles? Might not help if OP has a good job in their field already.

What's FIFO? And how do I know which method my exchange is using? I've been using Coinbase and just downloading their tax forms.

FIFO stands for "First In, First Out" - it means when you sell crypto, the system assumes you're selling your oldest purchases first. This can result in higher taxes if your earliest purchases were at lower prices. Coinbase provides the data, but they don't actually choose your accounting method for you - that's your choice when you file your taxes. Many tax software programs default to FIFO because it's simpler, but you can usually change to specific identification method which lets you choose which specific units you're selling (like choosing to sell the ones you bought at higher prices first to minimize gains).

Yes! Exchanges are terrible with this. My Binance report was missing transactions from coins I transferred in from other wallets. You really need to track everything yourself or use dedicated crypto tax software.

That's really helpful to know! Thanks for sharing your real experience. I'll make sure to have solid documentation ready in case we get a similar notice. Did you respond to the notice yourself or have your accountant handle it?

Our accountant drafted the response, but we had to provide all the backup documentation showing these were actually rental payments. The key was having the platform statements that clearly showed these were payments for specific rental properties. Our accountant said the IRS sees this issue frequently with vacation rental partnerships using platforms like Airbnb, VRBO, etc.

Omg that's a really good point I hadn't even considered! We are on accrual basis, and we definitely have December bookings that get paid out in January. Now I'm worried about potential mismatches. How did you handle this in your case?

We included a separate reconciliation schedule that showed: 1) income per 1099s received for the tax year, 2) plus accrued income from prior year paid in current year, 3) minus income accrued in current year but paid in next year, 4) equals income reported on tax return. Basically you want to show the math of how you get from your 1099 amounts to what's on your return. We also noted which specific properties had timing differences. It's a bit more work, but it creates a clear audit trail.

Did you have any data migration issues? We have 10+ years of client data in Onesource and I'm worried about losing historical information. Were you able to bring over basis info and carryforwards?

Data migration was our biggest headache. Most basics transferred okay, but partnership basis information had to be manually verified for every partner. We lost some of the historical allocation details and had to rebuild them. Carryforwards like capital losses and charitable contributions were particularly problematic - about 25% had errors we had to fix manually. If you do switch, I highly recommend running parallel systems for a year and comparing outputs before fully committing. Budget extra staff time for data verification during the transition.

I've used both extensively. For partnerships specifically, Lacerte is significantly better - especially for complex allocations and multi-tiered partnerships. The additional cost pays for itself in time savings and reduced errors. ProSeries struggles with more complex 1065s and the data entry flow isn't as intuitive.

This is really helpful advice. Should we get an attorney involved to draft the documents properly? Is there anything specific we should include in the promissory note to make it clear this is a legitimate loan transaction?

Yes, I would definitely recommend having an attorney draft or at least review your documents. The cost of legal help upfront is much less than dealing with IRS issues later. Make sure your promissory note includes all standard loan terms - principal amount, payment schedule, consequences for default, security interest in the property, etc. Even though there's no interest, everything else should look like a standard loan. Also include language acknowledging that both parties understand there may be imputed interest for tax purposes. Having your uncles keep a payment ledger showing receipt of your payments provides additional documentation of the loan's legitimacy.

That's actually a really good point. I went through something similar and was able to deduct the imputed interest against the rental income I was receiving. Definitely helped offset the tax burden on the rental income!