That's a really good point I hadn't considered. The rental property is actually in a different state than where I live. So you're saying I might need to file a non-resident state tax return for the state where the rental is located? Were there any resources you found helpful for figuring out the state-specific requirements?

Yes, you may need to file a non-resident state return. It depends on the specific state's rules where your rental is located. Some states have minimum income thresholds before filing is required, while others want you to file regardless of the amount. I found the state's department of revenue website to be the most helpful resource. Most have specific sections for non-resident property owners. Also, software like TurboTax or H&R Block will usually prompt you about this situation if you indicate you have rental property in another state. In my case, I had to file in Arizona even though I live in California because my rental income exceeded their minimum threshold.

That wouldn't work because OP already said they don't plan to use the truck for business after driving it home. You can't just allocate part of a vehicle purchase to business use for a one-time thing and then convert it to 100% personal use. The IRS would see right through that.

9 Could they also try to get the IRS to subordinate their lien instead of a full discharge? I've heard this can sometimes be easier to get approved if you're planning renovations that will increase the property value.

3 Yes, subordination is another option, particularly if you're planning significant renovations. With subordination, the IRS doesn't remove their lien but agrees to take a secondary position behind another lender. This could allow you to get renovation financing or a new mortgage on the property. For this to work, you'd need to demonstrate that the improvements will increase the property value enough that it ultimately benefits the IRS's position as well. Form 14134 is used for subordination requests. Like with discharge applications, documentation of your renovation plans and projected value increase will be critical.

1 That's really helpful, thanks! Did your brother end up paying anything to the IRS to get the discharge, or were they able to get it completely removed because of the property condition? I'm trying to figure out what this might end up costing me beyond attorney fees.

Right now I'm using TurboTax Business for the partnership return and regular TurboTax for my personal. I looked through both and couldn't find any specific option for "incorrect 1099-NEC issued to individual instead of business." Do you know if TurboTax has this capability somewhere?

TurboTax isn't great at handling this specific situation. In TurboTax Business, you'll need to manually enter the 1099-NEC income as "income not reported on a 1099" since you technically don't have a 1099-NEC issued to the LLC. For your personal TurboTax return, you'll need to enter the 1099-NEC, but then add a negative "Other income" line on Schedule C with a description like "Income reported on Partnership Form 1065" to offset it. Make sure to include an explanation statement with both returns. If you're doing this more than one year, I'd honestly recommend switching to TaxAct or even paying a professional to use Lacerte, as they have specific workflows for this exact scenario.

I can share what happened to me. I didn't handle an incorrect 1099 properly in 2022 (just reported it on Schedule C), and I got a CP2000 notice from the IRS about a year later because the K-1 income from my partnership didn't match what they expected based on the 1099s. Took about 4 months and several letters to resolve. Not a full audit but definitely a headache.

What's the difference between "no tax liability" and getting a refund though? If the government gave me money back, doesn't that mean I didn't owe anything?

Great question. Tax liability means the total amount of tax you owe based on your income before any withholding is considered. Getting a refund just means you had more withheld throughout the year than your final tax liability. For example, if your total tax liability was $3,000, but your employer withheld $4,200 throughout the year, you'd get a $1,200 refund. But you still had a $3,000 tax liability. To qualify for exempt status, your tax liability would need to be $0 before considering any withholding.

I tried it last month - it's actually pretty good if you have a simple tax situation. You need your most recent pay stub and last year's tax return. It walks you through everything step by step and gives you exact instructions for filling out your W-4. Way better than guessing or going exempt.

Can you still e-file past years or do you have to mail them in? And what about state returns?

You'll need to mail in prior year returns - the IRS doesn't allow e-filing for tax years more than 2 years past. Print everything out, sign the forms, and send them via certified mail so you have proof of filing. For state returns, it varies by state. Some states do allow e-filing for prior years, but many follow the same rule as the IRS. Most tax software can still prepare state returns for prior years for around $15-20 per state. Just make sure you're using the software version for the correct tax year - 2021 taxes need to be prepared using 2021 tax software, etc.

Yes! I got a first-time penalty abatement when I filed 2 years late. You have to specifically request it though - call the IRS after you file and explain that you had a clean compliance history before this. They waived about $1200 in penalties for me.