Does this apply even if you use one of those tax relief companies that advertise on radio? They always claim they can settle for "pennies on the dollar" but I assume that's just marketing hype?

Those "pennies on the dollar" claims are extremely misleading. What those companies are referring to is the IRS Offer in Compromise program, which is only available in very specific hardship situations where you genuinely cannot pay your tax debt. You have to prove significant financial hardship, and most people who apply get rejected. Those companies charge thousands in fees for something you can do yourself, and they often make promises they can't keep. They can't get any better deal from the IRS than you can get yourself. And yes, even with an accepted Offer in Compromise, the IRS will still apply interest to your original tax debt before determining your settlement amount.

Did you have to fill out any special forms for the penalty abatement? Or was it just handled over the phone?

Thanks for mentioning the EIC! I make about $42,000 a year as a dental assistant, would that income level qualify me for the Earned Income Credit with two dependents? And I actually did pay for some doctor visits and prescriptions for my niece when she got strep throat this year, so I'll definitely save those receipts.

Yes, with an income of $42,000 and two qualifying dependents (your daughter and niece), you should qualify for some amount of Earned Income Credit. For 2024, the income limit for EIC with two qualifying children is around $55,000 for a single filer or head of household, so you're well within the range. Definitely keep those medical receipts! While you might not exceed the 7.5% AGI threshold for medical deductions, it's always good to track everything. Also, don't forget about any education expenses for both children - there might be credits available for those as well, like the American Opportunity Credit or Lifetime Learning Credit when they're older.

This happened to my brother and his ex-wife! Both claimed their daughter and it was a MESS. His refund was delayed for months while the IRS sorted it out. They even had to submit additional documentation to prove who provided the most support.

Exactly! And what makes it worse is that these conflicts can trigger correspondence audits which can delay refunds by months. The IRS typically sends notices to both parties asking for proof of eligibility to claim the dependent. The person who doesn't have the right to claim the dependent but filed first can cause major headaches for the rightful claimant. That's why it's so important to have that conversation early and get something in writing, even if it's just a simple signed statement that can be kept with tax records.

That's a great point about documentation - I hadn't considered how much more scrutiny a luxury vehicle might get. Do you think it matters if I use actual expenses vs. standard mileage rate when it comes to audit risk? And were there specific record-keeping issues the IRS focused on during your audit?

In my experience, using actual expenses (like you'd need to do for depreciation) definitely increased the scrutiny compared to standard mileage rate. The IRS agent specifically told me that luxury vehicles using actual expense method are flagged more frequently. During the audit, they focused heavily on three things: 1) Contemporaneous mileage logs (they wanted to see that I recorded trips when they happened, not recreated later), 2) Documentation of business purpose for each trip, and 3) Evidence that I had another vehicle for personal use. They were very skeptical of my claim that the Mercedes was 100% business when I didn't have another car in my name. My advice: keep a dedicated app or logbook in the car, document every single business trip with purpose and mileage, take periodic odometer photos, and keep all maintenance records showing the mileage progression. If you're claiming 100% business use, they'll want to see how you handle personal transportation.

Those limits seem low - is that for all vehicles or just luxury ones? I thought there were special rules for trucks and SUVs that let you deduct a lot more.

I use a fillable PDF that they can complete digitally. It's set up so they can't submit it if required questions are unanswered. I also color-code sections based on complexity - green for simple questions, yellow for ones that might need thought, and red for complex items we'll definitely discuss during our meeting. The pre-filled approach for returning clients has been the biggest time-saver. I just send last year's completed form and say "please review and note any changes for this year" - gets much better response rates than starting from scratch each time.

Do you have them complete it digitally or on paper?

We've incorporated key Schedule B items into our engagement letters for partnerships. We specifically include language about foreign activities, ownership, and listed transactions. It doesn't replace getting the specific answers, but it does create another layer of documentation and client awareness.

That's a really good point I hadn't considered at all. So would it be better to have two separate LLCs in that case? Would that substantially increase my paperwork/costs?

Yes, from a liability protection standpoint, two separate LLCs would offer better protection. If something happens in your courier business, the game development assets would be sheltered in the separate LLC. It does increase some paperwork and costs. You'd pay two state filing fees (usually $50-$150 per LLC depending on your state), potentially two annual report fees, and would need to maintain separate books, bank accounts, and records for each entity. If you're a single-member LLC filing as a pass-through entity, the tax filing isn't substantially more complicated - you'd just have two Schedule Cs instead of one. A middle ground some people choose is starting with one LLC, then separating into two once the second business (game development) actually starts generating some revenue or when the assets become valuable enough to justify the extra protection.

That's such a smart approach! How complicated was it to set up the DBAs? And did you need separate bank accounts for each one?