Wouldn't amending returns from potentially years ago be super complicated though? And aren't there time limits on how far back you can amend?

You're right that there are time limits - generally 3 years from the original filing date or 2 years from when you paid the tax, whichever is later. So this approach only works if the inventory was purchased relatively recently. The complexity really depends on your specific situation. If most of the stolen inventory was purchased in the last couple of years, amending might actually be cleaner than trying to figure out the theft loss calculations. But if the inventory was accumulated over many years, then the theft loss approach on Form 4684 probably makes more sense despite the complications.

The IRS Disaster Resource Center is specifically for federally declared disasters, so it wouldn't apply directly to a robbery situation. However, you're right that some of their calculation methods could be helpful as a reference. For a robbery, you'd be better off looking at the specific IRS guidelines for theft losses in Publication 547. There's also some good information in Publication 584-B (Business Casualty, Disaster, and Theft Loss Workbook) that has worksheets for calculating and documenting business losses.

This is super helpful! I'm definitely going to use these points when interviewing potential CPAs. Quick question though - I've been operating as a single-member LLC but have been thinking about switching to an S-Corp. At what income level do you think that makes sense for an eCommerce/digital marketing business?

For digital marketing agencies and eCommerce businesses, the S-Corp election typically makes sense when your net profit reaches around $40,000-$50,000 annually. At that point, the self-employment tax savings usually outweigh the additional costs and compliance requirements. Remember that with an S-Corp, you need to pay yourself a reasonable salary subject to payroll taxes, with the remainder taken as distributions. For digital service businesses like yours, the IRS expects a higher percentage as salary compared to product-based businesses, usually 60-70% of profits. The exact amount depends on what similar roles would pay in your market and your level of involvement.

This is solid advice. My "eCommerce expert" CPA didn't understand that Shopify Payments fees should be treated differently than regular credit card processing. Ended up having to file an amended return. So annoying.

How much did it cost to have an attorney prepare the 706? I've heard it can be several thousand dollars even for straightforward estates. Wondering if it's worth it when no tax will be owed.

We paid around $8,000 for the attorney to prepare the Form 706, which included a full inventory and appraisal of assets. This was for a moderately complex estate with some business interests and multiple properties. The cost can vary significantly based on the complexity of the estate and your location. While it seemed expensive at the time, especially since we knew no tax would be due after applying the DSUE, I now view it as insurance against future complications. The step-up in basis alone was worth documenting properly, as it saved significant capital gains taxes when certain assets were later sold. Some attorneys offer more competitive rates for "no-tax-due" 706 filings, so it's worth shopping around.

Can confirm this! We scrambled at the last minute and the rush appraisals cost us almost double. Also, make sure to elect portability of any unused exemption even if you don't think the surviving spouse will need it. Tax laws and situations change.

7 I tried using that estimator but got confused halfway through. It asked for projected deductions and I had no idea what to put. Do you just guess? Or is there a way to figure out what deductions they'll have for this year?

11 For the deductions section, you can use last year's deductions as a starting point if your situation hasn't changed much. If your parents take the standard deduction (which most people do now with the higher amounts), you can just select that option without itemizing. If they do itemize, have them look at Schedule A from last year's return and use those figures as estimates, adjusting for any known changes (like if they paid off their mortgage or expect higher medical expenses this year).

16 Wait, so even if they pay everything they owe by the tax deadline, they can still get penalties if they didn't pay enough during the year?? That seems really unfair!

Does the spouse need to file anything special along with the return when they mark the other person as deceased? Like a death certificate or anything official?

For a joint return where one spouse is deceased, you generally don't need to submit a death certificate with the return itself. You simply write "DECEASED" after the deceased spouse's name at the top of the return, and include the date of death. If the surviving spouse is filing as the deceased taxpayer's personal representative, they should sign the return and write "Filing as surviving spouse" in the signature area. For more complex situations involving larger estates that require Form 706, additional documentation would be needed, but for typical joint returns, the notation is sufficient.

So sorry for your loss. I went through this with my husband last year. Another tip: request a tax transcript from the IRS for the past few years. Sometimes there are refunds or issues you didn't know about, and it gives you a complete picture of what the IRS has on file.