Does writing in red actually make a difference? I've never heard of that before. Also, do you have to redo all the calculations from scratch or just the changed portions for the second amendment?

The red ink absolutely helps - it flags the return for special handling in the processing centers. IRS employees are trained to look for these markings on paper returns. It's an old-school trick but still works. For calculations, your second amendment needs to show the correct final figures for your entire tax situation, not just the changes from the previous amendment. Think of each amendment as a complete replacement of your return, showing what it should have been if all information had been available originally. The "changes" column on Form 1040-X should show the difference between your last filed amendment and this new one, not between the original return and this one.

I filed an amended return in December and just got it processed last week, so that's about 3.5 months. My brother filed his in February and already got his processed though, so it seems inconsistent. Might depend on complexity or just luck of the draw.

Did your CPA also help you throughout the year or just at tax time? And how much more did you end up paying compared to your tax preparer?

My CPA definitely helps year-round. He reviews my books quarterly and advises on timing major purchases for maximum tax advantage. He's also helped me set up proper accounting for each location to track profitability separately. I pay about $2,200 per year compared to $650 for my former tax preparer, but with the tax savings and business insights, it's been one of my best investments. The first consultation was free, and he clearly explained how his strategies would save more than his fee.

Good point! My "tax preparer" is actually an EA and she's been fantastic with my two retail locations. Much cheaper than the CPAs I interviewed but still knowledgeable about business tax strategy.

Thanks everyone for the advice! Quick follow-up question - does getting an EIN mean we have to do anything special with state taxes or is that just for federal?

Getting an EIN is primarily for federal tax purposes, but you'll likely also need to register your business with your state. Most states have a separate business registration process and may issue you a state tax ID number that's different from your federal EIN. You'll need to check your specific state's requirements, but typically you'll need to register with your state's department of revenue or taxation, especially if you'll be collecting sales tax. Many states have online portals now that make this process fairly straightforward.

Be careful with S-Corps though - they require more paperwork, formal payroll processing, and you really need to justify that "reasonable salary." My accountant said for businesses making under $75k in profit it's usually not worth the extra hassle.

I hadn't even thought about the Medicaid implications. That's a really important point since she might need that level of care eventually. Is there a way to use the proceeds for her benefit that wouldn't trigger Medicaid issues while still meeting her needs?

You should use the proceeds only for your mom's benefit and keep meticulous records of every expenditure. Maintaining a separate account specifically for her funds managed under the POA is essential. This money can be used for her care, living expenses, medical costs not covered by insurance, and quality of life improvements. For Medicaid planning, some families work with elder law attorneys to establish properly structured trusts, but you need professional guidance specific to your state as the rules vary. The key is demonstrating that funds were used for her benefit rather than gifted away to avoid Medicaid spend-down requirements.

This is so important! My parents sold their house last year and we forgot to account for the $30k kitchen renovation they did in 2010. Would have lost out on that adjustment to the basis if the closing agent hadn't mentioned it. Old credit card statements can help prove these expenses if you don't have the receipts anymore.

Thanks for this clear explanation! So even though he pays for a lot of their expenses, the relationship test is a hard requirement? Would we need to amend both our returns now, or just his?

The relationship test is absolutely a hard requirement that can't be worked around just with financial support. The IRS is very clear on this point. You'll need to amend your fiancé's return to remove the children as dependents. You should also file or amend your return to claim them if you're eligible (meet the tests for claiming your own children). This should resolve the issue with the IRS, though you might still face some penalties or interest if there was a significant underpayment on your fiancé's original return.

What about common law marriage states? Would that change anything in this situation?