Wow, thanks for sharing this. Do you know which specific documentation was missing in your brother-in-law's case? I definitely want to avoid that situation.

From what he told me, the project didn't have proper engineering certification proving it met the IRS technical requirements. Also, the transfer agreement wasn't detailed enough - apparently the IRS wants specific language acknowledging the transfer of tax attributes and representations about project qualification. The other issue was timing - the project claimed it was placed in service in 2023, but couldn't provide evidence. Since these credits are based on when projects are completed and operational, that's a big deal to the IRS.

That's correct. The transferability provisions in the Inflation Reduction Act only apply to certain business credits (primarily Section 45 and Section 48 credits for commercial/business installations). The Residential Clean Energy Credit (Section 25D) that applies to systems installed on your personal residence cannot be transferred or sold. This is one of the most common misconceptions about the new transferability rules. Only business-generated credits can be sold, not personal residential credits. However, your unused residential solar credit can carry forward for up to 5 years on your own tax returns, so you might be able to use it gradually if you have tax liability in future years.

Does it handle casualty losses well? I had damage from the tornado in Kentucky and I'm worried about messing up the documentation.

Yes, FreeTaxUSA does handle casualty losses - they have a guided interview process for Form 4684 Casualties and Thefts. It asks all the relevant questions about your loss, insurance reimbursements, and fair market values. For tornado damage documentation, make sure you have before/after photos if possible, all repair receipts, insurance claim documents, and any FEMA assistance information. The software prompts you for all this, but it's good to have everything organized beforehand. I found their help articles very thorough on casualty loss requirements.

Thanks for the insight! Do you think it's worth paying a CPA $1000 vs H&R Block for my situation with the Florida casualty loss? I'm trying to decide if the extra cost is worth it.

For a significant casualty loss like yours ($200K), I'd absolutely recommend going with the CPA over H&R Block. While H&R Block has some good preparers, their training specifically on casualty losses is often limited compared to a CPA's education and experience. A good CPA will likely save you more than the $200-400 difference in fees through proper documentation strategies, timing considerations for your loss claim, and potentially finding additional disaster relief provisions you qualify for. They'll also provide better audit protection and assistance if questions arise later. With losses of that magnitude, the additional expertise is definitely worth the investment.

You're right, there were additional pages with the K-1. Looking back at them, it says it's related to "business property partially destroyed in a natural disaster" but it doesn't give specific filing instructions. Would this change where I enter it?

That changes everything! A loss from business property damaged in a natural disaster is definitely a casualty loss from a federally declared disaster area, which gets special treatment. This should be reported on Form 4684 (Casualties and Thefts), Section B since it's business property. The good news is that these losses aren't subject to the usual personal casualty loss limitations and can be deducted even if you take the standard deduction. After completing Form 4684, the business casualty loss will then flow to your Schedule A, but in a different section than regular itemized deductions, potentially allowing you to claim both the standard deduction and this special loss.

This is correct. If it's from rental property, it would go on Schedule E. Schedule K-1 codes can be really confusing because the same code might be reported differently depending on the nature of the underlying asset or activity. My accountant spent hours sorting through similar issues with my K-1s last year.

But doesn't entering all those zeros trigger some kind of flag with the IRS? I've heard that too many zeros can lead to an audit.

That's actually a common misconception. Entering legitimate zeros for amounts that genuinely are zero won't trigger an audit. The IRS is looking for inconsistencies and unreported income, not properly reported zeros. What can raise flags is if you have foreign accounts on an FBAR but don't report them on Form 8938 when required, or vice versa. Consistency across your filings is more important than avoiding zeros.

Thanks for pointing to the actual instructions - I just checked and you're right. On page 2 it says "report the value of specified foreign financial assets and any income, gain, loss, deduction, or credit..." So reporting the asset with zero income is correct.

How exactly do I read these transcripts? I just downloaded mine and it's full of codes and dates that make absolutely no sense to me. How do I find what year the debt is from?

Tax transcripts can definitely be confusing! Look for transaction codes (TC) like "420" which means an audit adjustment, "300" series codes which are related to additional assessments, or "480" which indicates an adjustment due to examination. The date listed next to these codes shows when the adjustment was made. The cycle date (usually formatted like 20231405) tells you the processing year and week. You'll also want to look for any codes in the "500" series which indicate that collection activity has occurred.

Yep, happened to me too but with student loans. The worst part was that I thought I was current on payments, but apparently one payment hadn't processed correctly months earlier, which snowballed into a "delinquent" status. Always check your credit report too - sometimes these things show up there before you get official notices.