You're absolutely right about depreciation recapture. When you sell a rental property, any depreciation you claimed (or were entitled to claim) during the rental period must be "recaptured" and is taxed at a maximum rate of 25%. This is separate from the capital gains tax on any appreciation in the property's value. So the total tax on a rental property sale is often a combination of: 1. Depreciation recapture (up to 25%) 2. Capital gains tax on the appreciation (0%, 15%, or 20% depending on income) 3. Possibly the 3.8% Net Investment Income Tax if income is above certain thresholds This makes it even more important for the OP to ensure they're accounting for all possible deductions and basis adjustments to minimize the overall gain.

That's a really good point! I do have some stocks that are currently at a loss. If I sell those before December 31, I could offset some of the capital gains. I was holding onto them hoping they'd recover, but maybe taking the loss now makes more sense tax-wise. I'll talk to my CPA about this strategy. Thanks for the suggestion!

Code 570 is a refund hold and 971 usually means they sent you a notice explaining why. Check your mail carefully - sometimes these notices look like junk mail. My 570/971 combo was because they needed to verify some education credits I claimed. Once I sent in the documentation they requested, it took about 2 weeks to resolve.

Thanks for explaining what those codes mean! I just checked my mail pile more carefully and found a letter from the IRS that I thought was just the annual tax transcript I requested. It's asking for verification of my kids' social security numbers and residence. Going to call them tomorrow with this info. Really weird that the agent I spoke to couldn't tell me this was the issue rather than just saying "system issue" - would have saved me weeks of waiting!

I used FreeTaxUSA and mine went through fine - got my refund in 12 days. My sister used TurboTax and she's having the same delay issues. Might be coincidence though.

Did you have any issues with the ethics of reviewing other preparers' work to find clients? I want to try this but don't want to create bad blood with established preparers in my area.

That's a fair concern. I was careful to frame it as a "second opinion" rather than explicitly looking for errors. I also never mentioned the names of the previous preparers when I found issues - I just objectively showed what was missed and how it impacted the return. Most of the errors I found were from self-prepared returns using tax software anyway, not professional preparers. When I did find professional preparer errors, they were typically from national chains with seasonal workers rather than local CPAs. My approach was always educational rather than critical, which helped avoid any professional conflicts.

I used TaxSlayer Pro last year for about 50 returns. It's definitely more budget-friendly but has some limitations. The interface isn't as polished as ProSeries or Drake, and I found it struggled with more complex returns involving multiple states or complicated business income. For basic W-2 employees with standard deductions, it works great. But as soon as you get into Schedule C with inventory or multi-state returns, it gets clunky. Customer support was hit or miss too. I'd say it's a good starter option if your clients have straightforward situations.

Thanks for the advice! So for my 2023 unreported income, should I file an amended return now or wait until after I file my 2024 taxes next year? And what kind of penalties might I be looking at?

I'd recommend filing an amended return for 2023 as soon as possible. The longer you wait, the more penalties and interest can accumulate if you end up owing tax. Since the amount is relatively small, your penalties would likely be minimal, especially if you qualify for first-time abatement (which the IRS often grants to taxpayers with previously good compliance history). For your 2024 taxes that you'll file in 2025, keep them completely separate from the 2023 issue. Handle the amendment now, then start fresh with good record-keeping for the remainder of 2024. Remember that quarterly estimated tax payments might be required for self-employment income, though with your amounts, you might fall below the threshold where those are necessary.

That's not entirely accurate. You can switch from actual expenses to standard mileage in later years, but only if you used standard mileage in the first year. If you start with actual expenses, then you're locked in.

Thanks for breaking this down so clearly! One more question - if I decide to start a small side business from home, would I immediately qualify for the home office deduction against that income? Or is there some minimum amount I need to earn first?

You would qualify for the home office deduction against your side business income right away - there's no minimum earnings threshold for taking the deduction. However, there are two important considerations to keep in mind. First, the space must be used "regularly and exclusively" for business, meaning you can't deduct your kitchen table if you also eat meals there. Second, while there's no minimum income requirement, if your business shows losses for multiple years, the IRS might classify it as a hobby rather than a business, which would disallow the deductions. Generally, showing a profit in 3 out of 5 years helps establish business intent.

I used the simplified method last year for my freelance work. It's definitely easier but might give you a smaller deduction depending on your situation. With the $5/sq ft method, I got a $1,250 deduction (250 sq ft office). When I calculated the actual expenses method this year, I got almost $1,800 for the same space.