I actually hadn't considered bonus depreciation! That's a great point. I vaguely remember TurboTax asking something about "Section 179" and I think I might have said yes without fully understanding what it meant. Would that explain such a big difference?

Yes, that would absolutely explain the difference! Section 179 expensing and bonus depreciation can make a huge difference in the first year. Instead of depreciating certain components over their normal useful life (5-7 years for appliances, 15 years for land improvements, etc.), you can deduct the full cost in year one. If you applied Section 179 to eligible components of your rental properties in TurboTax, you might have fully deducted thousands of dollars worth of appliances, carpet, window treatments, etc., which would make your first-year depreciation much higher. FreeTaxUSA is probably calculating just the regular residential real estate depreciation (building value ÷ 27.5 years) without any bonus components.

This is what I was thinking too. If the total cost basis for all three properties was $758,175, but you're only entering one property into FreeTaxUSA, that would definitely cause a mismatch.

Good point about state taxes - I hadn't even thought about that angle. Do you know if taking cash out triggers state tax obligations in the states where the previous properties were located? Or is it just based on my current state of residence?

It primarily depends on your current state of residence, but some states can get complicated if properties were located there. For example, California is notorious for trying to tax the deferred gain when California property is exchanged for out-of-state property. In your case, since you previously owned property in Washington state, you're probably fine there as Washington doesn't have state income tax. Nevada also doesn't have state income tax, so no concerns with your current property. But wherever you're currently a resident will likely want their share of your recognized gain from the cash boot you're taking out.

This is so important! My brother did a partial 1031 last year and his QI made an error in the documentation that led to the entire exchange being disqualified. He ended up owing tax on the FULL gain, not just the cash he took out. Make sure you use a reputable QI who specializes in these partial exchanges.

This is super informative! I had no idea about the "Wealth Squad" - is this something regular people with side businesses need to worry about? Or is it more for super wealthy individuals? Like what's the threshold where they start getting interested?

The Wealth Squad typically focuses on individuals with income or assets over $10 million, so most regular people with side businesses wouldn't be on their radar specifically. However, anyone with unusual income patterns can still trigger standard IRS compliance flags. For more typical side businesses, it's the regular IRS examination divisions that might notice discrepancies. The important thing is maintaining good records that show the source of your income and legitimate business expenses. Unexplained deposits or lifestyle expenses that don't match reported income are what typically trigger closer examination, regardless of income level.

True about shell companies! I work in banking and you wouldn't believe how sophisticated some fraud schemes are. But even with elaborate setups, people eventually slip up. Either they can't resist flaunting wealth or they make a reporting mistake. That's usually how they get caught.

Thanks for bringing this up! I checked my paystubs and they definitely show federal and state tax withholding, so I should be getting a W-2. They were taking out Social Security and Medicare too. I'm thinking maybe they just don't have my current address since I moved shortly after leaving? But still, they should've responded to my emails asking about it. So frustrating.

That's good you confirmed they were withholding taxes! In that case, they're definitely required to provide a W-2. The address issue could definitely be part of the problem - sometimes companies just mail them to the last address they have on file. You might want to check if your former employer used a third-party payroll service like ADP, Paychex, or Gusto. If they did, you might be able to create an account directly with that service and access your W-2 electronically. Many of my past employers used these services, and I could get my tax forms even years later by logging into those platforms.

This actually works surprisingly well! When my husband's former employer was ignoring his requests, he physically went to their HR office. Amazing how quickly they produced his W-2 when he was standing right in front of them. Sometimes the old-school direct approach is still the most effective.

Do you know if California requires a separate extension filing?

California automatically grants you the same extension as federal (6 months) without requiring a separate form - but ONLY if you don't owe additional tax. If you do owe CA tax, you need to file Form FTB 3519 and make a payment by the original due date to avoid penalties. New York also gives an automatic extension matching the federal timeframe. Texas doesn't have state income tax so no worries there. Most states follow federal extensions but there are definitely exceptions, so always double-check your specific state's requirements.

TaxAct tried to charge me last year when I went to submit the extension. Did you actually get through the whole process for free?