This is a great point about needing a team. Do you recommend finding professionals who already work together or assembling my own team? I'm worried about coordination issues if everyone is working separately.

I strongly recommend finding professionals who already have established working relationships. Ask the CPA you're considering who they regularly collaborate with for estate planning and financial advice. Existing teams will have systems for sharing information efficiently and won't duplicate efforts. The worst scenario is having different advisors giving contradictory guidance. For example, I've seen situations where an investment advisor recommends selling assets that would trigger massive tax consequences the CPA would have advised against. When your team already works together, these issues get addressed before they become problems.

Check out the National Association of Real Estate Tax Professionals (NARETP). I found my CPA through them and it made a huge difference. Multi-state properties create special issues with depreciation tracking and state-specific rules that general CPAs often miss.

That's an interesting option I hadn't considered. If I recharacterize to Traditional IRA, would I still need to worry about the earned income limit? And would I need to do anything special on my tax forms?

You still need earned income to contribute to a Traditional IRA, but the same limit applies - your contribution can't exceed your earned income for the year. So you'd still need to recharacterize the excess amount above your $4,200 income. For tax forms, you would report the recharacterization on your tax return using Form 8606 if any portion is non-deductible. Your IRA custodian will also send you a statement showing the recharacterized amount, which you should keep with your tax records. The good thing is recharacterization isn't a taxable event if done properly and before the deadline, so you avoid the penalties associated with excess contributions.

Actually, if you withdraw the excess contribution plus earnings before you file your taxes (and before the due date), you don't need to file an amended return. You just report the earnings portion on your current year taxes. The IRA custodian will issue a 1099-R for the withdrawal.

Thanks for mentioning this! Unfortunately I'm pretty certain I owe them money since I had some 1099 income without any withholding. But that's good info to know for the future. Do you know if most tax preparers handle late returns like this or should I look for someone who specializes in them?

Most regular tax preparers can definitely handle late returns - it's pretty common and not as complicated as you might think. You don't need a specialized tax attorney or anything unless you have a really complex situation or owe an enormous amount. Any decent tax preparer or even the major tax software packages can guide you through filing a late return. They'll help calculate the penalties and interest too. If your situation is relatively straightforward (W2 income, maybe some 1099 work), you could even do it yourself with good tax software.

This is great advice! I got first-time abatement when I missed filing during my mom's cancer treatment. Saved me over $1,100 in penalties. The IRS agent was surprisingly understanding when I explained what happened.

1 That makes a lot of sense actually. I did get some collection calls before I paid it off. So if that's what happened, what should I do? Contact the original creditor?

5 Yes, contact the original creditor first. Ask them specifically if they sold your debt and then issued the 1099-C. Request documentation showing when they sold it and to whom. Then contact the collection agency and get proof that you paid them in full. You'll need both documents to show that you didn't actually have canceled debt - the debt was transferred, not forgiven. Submit a dispute to the creditor that issued the 1099-C and ask them to issue a corrected form. Keep copies of all communications and payment receipts in case you need to explain this situation to the IRS.

11 TurboTax has a specific section for 1099-C under "Income" and then "Less Common Income." It'll ask for all the information from the form and help determine if any exclusions apply. Just make sure you have the actual 1099-C in front of you when you get to that section.

Good point! Our AGI is actually around $325,000 so we're approaching that threshold. Does that change your recommendation on whether we should include the rental losses in QBI or not?

Since you're still below the threshold (but approaching it), you still likely benefit from excluding the rental losses from QBI. At your income level, you can take the full 20% deduction on positive QBI without the wage/property limitations. If including rental losses would reduce your positive QBI from your wife's self-employment, then excluding them makes perfect sense. However, if your income rises above the threshold in future years, the calculation becomes more complex, and including some loss activities might occasionally be beneficial to stay under the phase-out limits.

I've used both TaxAct and FreeTaxUSA. TaxAct seemed to handle the QBI rental questions better and was more clear about the safe harbor requirements. It specifically asked about the 250-hour test and contemporaneous records, while FreeTaxUSA was more vague.