But don't you get hit with franchise taxes in most states when you set up those LLCs? I heard California charges $800 minimum per LLC, so with multiple properties that adds up fast. Are the tax benefits really worth those extra costs?

You're right about the franchise taxes - they definitely cut into the benefits. In California it's $800 per LLC which is painful, but I'm in Tennessee where the annual fee is much lower ($300). For me, the math still works out when I consider both the tax advantages and the asset protection. I'm able to legitimately deduct more business expenses through the holding company structure, including a portion of travel related to property management, home office expenses, and administrative costs that were harder to claim as an individual investor.

This is a great question about QBI and holding companies. The Section 199A deduction can be tricky with holding companies because certain structures might limit your ability to claim it. If your holding company is classified as a specified service trade or business (SSTB) and your income is above the threshold (which at $310k, yours is), you'll face limitations. However, a properly structured holding company might allow you to separate SSTB income from non-SSTB income, potentially preserving some of the QBI deduction.

That's a really good point I hadn't considered. Do you think the mortgage company would report that information directly to the IRS though? Or would they only discover it if they specifically investigated him for some reason?

Mortgage companies don't routinely report down payment sources directly to the IRS - that's not their job. However, they do file what's called a Mortgage Interest Statement (Form 1098) that shows the IRS your friend bought a property. If the IRS ever decides to audit your friend, they'd look at his income versus his expenses and assets. A $50K down payment that doesn't align with reported income would raise immediate questions. The IRS could then subpoena the mortgage application documents, which would reveal the source of funds. It's not about the mortgage company reporting him - it's about the paper trail created during the mortgage process that could be discovered during an audit. The bigger issue is your friend deliberately hiding taxable income, which has no statute of limitations for fraud.

What was the small exchange you used? Was it US-based? I'm wondering if offshore exchanges report to the IRS too or if they're safer.

Thanks for mentioning this! Do you know if setting up a payment plan affects your credit score? And is there a minimum amount I have to pay monthly or can I set it to whatever I can afford?

Setting up an IRS payment plan generally doesn't directly affect your credit score - the IRS doesn't report to credit bureaus like a normal lender would. However, if you fail to pay and the IRS files a tax lien, that WILL hurt your credit. So the payment plan actually helps protect your credit by preventing more serious collection actions. For monthly payment amounts, it depends on how much you owe. For debts under $10,000, you can pretty much set your own monthly payment as long as you can pay off the full amount within 3 years. For larger amounts, the IRS may want financial information to determine what you can afford. They're surprisingly reasonable about this - they'd rather get paid slowly than not at all.

This is actually brilliant advice. I had a similar situation (though not as old) and the Social Security earnings record was spot on. Combined with the IRS transcript it gave me everything I needed!

I didn't even realize there was a worksheet! I'll definitely look into that option. And yeah, the new form looks completely different from what I remember filing years ago - the elimination of allowances really threw me off. Thanks for the pointer about the worksheet!

Happy to help! The worksheet is actually on page 3 of the W4 form PDF from the IRS website. It's pretty user-friendly for simple situations like yours. Just be sure you're using the 2025 version of the form since they adjust the numbers slightly each year. Another tip: after you submit your W4, check your first couple of paystubs carefully to make sure the withholding looks reasonable. If it seems way off, you can always submit a new W4 to adjust. Most payroll systems let you update it anytime.

That's actually not how the new W4 works anymore. There's no place to put "0" since they eliminated allowances in 2020. The form is completely different now. You'd need to add an additional amount to be withheld on line 4(c) if you want extra withholding.

My employer actually did give me a letter saying the move was required for the position! Would that help with any other deductions you know about? And do you think there's any chance they'll bring back the moving expense deduction in time for this tax season?

The letter from your employer could potentially help if any of your expenses could be categorized as unreimbursed employee business expenses. Unfortunately, for most people, these aren't directly deductible either since 2018, but there are exceptions for certain qualified performing artists, fee-basis state or local government officials, and armed forces reservists. As for bringing back the moving expense deduction, it won't happen for this tax season. The Tax Cuts and Jobs Act provisions that eliminated this deduction are in effect through 2025. Any changes would likely come after that, when Congress reviews the expiring provisions. So definitely keep your documentation, but don't expect to use Form 3853 as a non-military taxpayer for at least a few more years.

I second the FreeTaxUSA recommendation! Been using them for years after getting fed up with TurboTax's constant upselling. Much clearer explanations about which forms you can and can't use. They won't be able to magically make Form 3853 available to non-military folks, but at least they'll explain WHY in plain English.