Thanks for this advice! I do have the original invoice somewhere in my files. When you removed the laptop from your fixed asset schedule, did you need to fill out any specific form beyond the Form 4797 that others mentioned?

No additional IRS forms are needed beyond Form 4797 for reporting the sale. The fixed asset schedule update is just for your own business bookkeeping - it's an internal document that tracks all your business assets, their purchase dates, depreciation method, and current status. You'll want to mark the laptop as "disposed" with the date and sale amount in your accounting system. If you use QuickBooks or similar software, there should be an asset disposal function that handles this automatically and creates the proper journal entries. This keeps your business balance sheet accurate and prevents confusion if you're ever audited.

For a 100% bonus-depreciated business asset like your laptop, you'll report it on Form 4797, Part III (Gain From Disposition of Property Under Sections 1245, 1250, etc.). This is because the gain from selling depreciable business equipment is considered "Section 1245 property" gain by the IRS. The entire $850 would be reported in this section as ordinary income, not as a capital gain, because it represents recaptured depreciation. If you're using tax software, it should guide you through this process once you indicate you're selling business equipment that was previously depreciated.

Does it matter that she refused to participate in the tax court case though? Seems unfair if she gets half when she thought it was a waste of time and wouldn't help.

While it seems unfair, her refusal to participate in the tax court case typically wouldn't eliminate her right to part of the refund. Courts generally look at the source of the funds used to pay the original tax bill (joint savings in your case) rather than who pursued getting it back. Think of it this way - if you had a joint debt that she paid from joint funds, and later you discovered an error and got a refund, the nature of the original payment (joint funds for a joint liability) usually determines how courts view the refund. Your efforts to secure the refund might entitle you to compensation for your time and costs, but the underlying refund typically remains jointly owned if it came from a joint return paid with joint funds.

What kind of penalty did they give you? Was it just interest or something more?

Do you need to have a dedicated space for a home office deduction, or can you use your living room/kitchen table etc. for different jobs? I'm thinking about taking on freelance work but don't have a separate room I can use exclusively.

For a home office deduction, the IRS requires that the space be used "regularly and exclusively" for business. This means you need a dedicated space - it doesn't have to be an entire room, but it needs to be a specific area used only for work. A corner of your living room can qualify, but only if that specific section is used solely for business and nothing else. If you're tight on space, even a dedicated desk that's never used for personal activities could potentially qualify. Just be aware that home office deductions can be a red flag for audits, so make sure you take photos of your setup and keep excellent records of your business use of the space.

What's the minimum income level where this S-corp approach makes sense? I'm making about $65k from various gigs and wondering if it's worth the hassle.

This is exactly what I suspected! Did they actively tell you guys to avoid mentioning that you weren't CPAs? Or were you trained to handle questions about credentials?

We were trained to say we were "certified tax preparers" which sounds impressive but really just meant we completed the company's internal training program. If directly asked if we were CPAs, we had to answer truthfully, but the script was to pivot to "I'm a trained tax professional with X years of experience using our proprietary software." Management knew most clients assumed we were CPAs or had accounting degrees, and they definitely didn't discourage that misconception. During training, they emphasized that we should highlight our "certification" and experience with the tax software rather than discussing formal credentials. It was deliberately misleading without technically lying.

That's actually a really smart approach. How do you find a CPA willing to do just a review rather than insisting on preparing the whole return? When I've asked in the past, they all wanted to do the complete service.

Does the IRS ever negotiate during the process? Like if they reject your initial amount, do they come back with a counter offer or just flat out reject you?

Yes, the IRS frequently counters with what they consider a more reasonable amount based on their calculations. If they think your offer is too low, they'll often send a letter explaining why they can't accept it and propose a higher amount they would accept. It's not like a flat rejection in most cases - it's more of a negotiation. When this happens, you can either accept their counter, submit a new offer with additional documentation to justify your original amount, or withdraw your offer entirely. This is why having your documentation solid from the start is essential.

Is there a specific form for offer in compromise or do you just write a letter explaining your situation?