Thanks for the TurboTax suggestion. The $200 price tag is definitely more reasonable than $850! Is there a significant learning curve the first time you use it for trust returns? I'm trying to gauge how much time I should set aside to figure this out.

The first year took me about 3 hours to get everything set up and understand how the trust taxation works. The software walks you through everything step by step, but there are some trust-specific concepts that take a bit to wrap your head around. The second and third years were much faster - maybe 45 minutes total since all the trust's basic information was already saved in the system. If your trust has straightforward income like interest or dividends, it's pretty manageable. The only tricky parts tend to be understanding when income is taxed at the trust level versus passed through to beneficiaries.

VITA programs typically only handle basic 1040s with income under certain limits. I've never seen one that handles fiduciary returns like 1041s for trusts. Are you sure about this info?

Thanks for the insider perspective! If I do decide to just prep this year's return, can I still benefit from their expertise without paying for the full package? I'm worried that if I don't get the multi-year review, I might miss something important from previous years.

You absolutely can benefit from their expertise on just this year's return. A good tax professional will naturally flag any concerning items they notice while preparing your current return, even without doing a formal review of previous years. If they spot something that looks like it might have been an issue in prior years, they'll mention it to you. Then you can decide whether it's worth paying for a more thorough review of those specific past returns. This more targeted approach often saves money while still addressing the most important issues.

I used H&R Block's premium service for a similar situation (RSUs and multiple states) and it was a disaster. They missed several deductions and didn't properly account for the double taxation issues between states. Had to file an amended return with a real CPA later. Would not recommend for truly complex situations.

Do you have any recommendations for a good Qualified Intermediary? Also, can you partially do a 1031? Like if I sell for $700k but only want to reinvest $500k, can I just pay taxes on the $200k difference?

I've used IPX1031 for my exchanges and they were very professional, but there are many reputable QIs out there. I'd suggest asking your real estate agent or attorney for local recommendations since you'll want someone familiar with your state's requirements. Yes, you can absolutely do a partial 1031 exchange. If you sell for $700k and only reinvest $500k, you'd pay taxes on the $200k difference (called "boot" in 1031 terminology). Just be aware that the mortgage rules get a bit tricky - if your debt goes down too much in the exchange, that reduction in debt can also be considered boot. So if you had a $400k mortgage on the old property but only get a $200k mortgage on the new one, that $200k reduction in debt might be taxable as well.

Thanks for sharing your experience! So if I understand correctly, it would be better tax-wise to: 1. Move into my current rental for 2+ years 2. Sell it as a primary residence (getting partial exclusion based on % of personal use) 3. Then do a 1031 on the taxable portion into a new rental property? That's an interesting approach I hadn't considered. Would definitely save on transaction costs too since I'd only be selling two properties instead of three in my original plan.

Yes, that's exactly right! By moving into your rental first, you establish it as a primary residence. Then when you sell, you can take the $250k exclusion on the portion of appreciation allocated to your personal use (based on time). The remaining portion (from the rental period) would still be taxable, but that's where you can use the 1031 exchange to defer those taxes by rolling that portion into a new investment property. This approach is much cleaner tax-wise and as you noted, reduces your transaction costs significantly. Just make sure you keep very clear records of when the property usage changed and get a good appraisal at the time you convert it from rental to primary to establish the value at conversion.

Thanks for this suggestion! My client actually did consider switching to a service charge model. Do you know if there are any specific records or documentation they would need to maintain if they went this route? And would this still allow the employees to receive similar compensation?

For service charges, they would need clear documentation showing these are mandatory fees rather than discretionary tips. This typically means updating all marketing materials, customer receipts, and internal accounting practices to clearly categorize these as service charges. Employees can absolutely receive similar compensation through service charges, but the key difference is that these would be classified as regular wages rather than tips. This gives the employer more control over distribution but also means the full amount is subject to payroll taxes upfront. Many employers who make this switch set up a clear distribution formula so staff understands exactly how service charges are allocated.

Which system do you use? We're a spa and our tip processing is a nightmare. We're spending so much time and money just managing the tip distribution and payroll calculations.

I haven't moved in the last 5 years, so that's not the issue in my case. Did they eventually update the status in your online account, or did it stay as "received but not approved" even after resolving whatever issues they found?

My online account actually never updated to show "approved" even after everything was resolved. The IRS rep I eventually spoke with said their online system often doesn't update that status field properly, especially for returns where you owe instead of getting a refund. They focus their system updates on refund cases. What ultimately mattered was that I had confirmation from the IRS that everything was processed completely. If you haven't received any notices requesting additional information or payment, you're probably fine despite what the online status shows.

You should be fine for mortgage purposes. What lenders care about is the tax transcript itself, not the status shown in your online account. You can request your tax transcripts directly through the IRS website or through your lender, and these will show your income history accurately even if your online account shows "received but not approved.