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Don't forget about electricity costs! I've been mining for 3 years and the biggest deduction besides equipment is power consumption. If you're mining at home, you need to calculate what percentage of your electricity bill goes to mining. I use a Kill-A-Watt meter to measure my rigs' exact usage. For the solar panels, keep all documentation showing they're used primarily for your mining operation. The IRS might question this since solar panels are typically considered home improvement, but if you can demonstrate they're mainly for business use, you've got a stronger case for deduction.
This is super helpful! Do you track your electricity use daily or just do a sample period? And for the solar panels, would it help if I kept logs showing the power production and how much is being directed to the mining rigs versus household use?
I do a sample tracking period of about 2 weeks each quarter to establish an average, then apply that to my bills. Seasonal changes affect both mining performance and solar output, so regular monitoring helps establish a realistic business percentage. Absolutely keep detailed logs for your solar setup. Document the total production and what portion powers your mining operation. Photos of your setup can help too. I actually have my mining rigs on a separate circuit with its own meter, which makes it extremely clear what power is being used for business versus personal. That kind of separation makes audits much easier if they ever happen.
Just a warning - don't forget about state taxes too! Federal is one thing, but states have wildly different approaches to crypto. Some treat it like intangible property, others follow federal guidelines. I'm in NY and they're super strict compared to when I lived in WY where they had no income tax.
Something similar happened to me last year, and it turned out my tax preparer had accidentally submitted my extension twice. Double-check with whoever prepared your taxes (if you used someone) before assuming the worst!
I prepared everything myself using TurboTax. This was definitely my first submission attempt. I called the Identity Protection Specialized Unit like someone suggested above, and they confirmed someone else tried filing with my SSN! Currently working through the identity theft affidavit process now. Thankfully I caught it early.
That's definitely more concerning then. Glad you called and confirmed! The earlier you catch these things and get the identity theft affidavit filed, the better. Make sure you also request an Identity Protection PIN from the IRS for next year - it's an extra 6-digit code that prevents anyone from filing electronically with your SSN without the PIN.
Quick question - does anyone know if filing the identity theft affidavit automatically extends your filing deadline? Or do I still need to submit a separate extension if this happens to me?
You absolutely still need to file the extension separately! The identity theft affidavit (Form 14039) doesn't extend your filing deadline. Make sure to submit Form 4868 by mail ASAP with "POTENTIAL IDENTITY THEFT" written at the top so they flag it for special processing.
3 Just as a heads up, writing a "kind letter" asking the IRS to remove the lien because you've been a good taxpayer isn't going to work. The IRS doesn't have the authority to just forgive tax debt because someone new bought the property. They're bound by specific regulations. Your options are basically: 1. Pay off the lien (probably not feasible at $240k) 2. Apply for a Certificate of Discharge (as others mentioned) 3. Try to negotiate an Offer in Compromise with the IRS (unlikely in your specific situation) 4. Sell the property subject to the lien (which will dramatically reduce what you can get for it
9 Could they also try to get the IRS to subordinate their lien instead of a full discharge? I've heard this can sometimes be easier to get approved if you're planning renovations that will increase the property value.
3 Yes, subordination is another option, particularly if you're planning significant renovations. With subordination, the IRS doesn't remove their lien but agrees to take a secondary position behind another lender. This could allow you to get renovation financing or a new mortgage on the property. For this to work, you'd need to demonstrate that the improvements will increase the property value enough that it ultimately benefits the IRS's position as well. Form 14134 is used for subordination requests. Like with discharge applications, documentation of your renovation plans and projected value increase will be critical.
10 My brother went through this exact situation! The key thing that worked for him was clearly documenting the property's condition with detailed photos and repair estimates. He was able to show that the "as-is" value of the property was much lower than the after-repair value, which helped with the discharge application. Also, definitely work with a tax attorney who specializes in IRS liens rather than trying to handle this yourself. My brother tried the DIY approach first and wasted 3 months before getting professional help. The specialist knew exactly how to structure the application and what supporting documentation would be most compelling.
1 That's really helpful, thanks! Did your brother end up paying anything to the IRS to get the discharge, or were they able to get it completely removed because of the property condition? I'm trying to figure out what this might end up costing me beyond attorney fees.
One thing to consider - if you just have W2 and 1099 income without complicated investments or business structures, software like FreeTaxUSA can handle past years for a fraction of what you were quoted. They charge around $15-20 per federal return for prior years. For 1099 income, you'll need to fill out Schedule C, but most tax software walks you through this with simple questions. Just make sure you have good records of your expenses to offset that 1099 income - things like home office, supplies, mileage, etc. Don't let a CPA scare you into thinking your situation is more complex than it is. The $8800 quote is appropriate for someone with seriously complicated tax issues, not basic W2 and 1099 filing.
You'll need to mail in prior year returns - the IRS doesn't allow e-filing for tax years more than 2 years past. Print everything out, sign the forms, and send them via certified mail so you have proof of filing. For state returns, it varies by state. Some states do allow e-filing for prior years, but many follow the same rule as the IRS. Most tax software can still prepare state returns for prior years for around $15-20 per state. Just make sure you're using the software version for the correct tax year - 2021 taxes need to be prepared using 2021 tax software, etc.
Has anyone here actually gotten a penalty abatement for filing late? I'm in a similar boat (3 years unfiled) and I'm worried about how much the penalties are going to be on top of what I owe.
Ezra Beard
Something nobody's mentioned yet - if your brother had any self-employment income (like mowing lawns, babysitting, etc.) in addition to his W-2 job, the filing requirements are different. Self-employment income over $400 requires filing regardless of age or total income. Also, for future reference, your brother should check box "Exempt" on his W-4 if he expects to have no tax liability for the year. This is probably why no federal taxes were withheld - either he or his employer already did this.
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Tate Jensen
ā¢That's a good point! He only has the restaurant job, no side gigs. But I'm not sure about the W-4 thing - I don't think he knew to check any specific box when he filled out his paperwork. Is that something the employer might have done automatically because of his age?
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Ezra Beard
ā¢Employers shouldn't automatically mark anyone as exempt based on age alone. When your brother filled out his W-4, he would have had to specifically claim exemption from withholding by writing "Exempt" in the appropriate space. It's possible he did this without understanding it, or maybe the employer made an assumption based on his age and income level (which they shouldn't do). For his new W-4 this year, if he expects to earn more than the standard deduction ($12,950), he should definitely not claim exempt status, as he'll likely owe taxes.
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Statiia Aarssizan
One benefit of filing that no one mentioned - it starts the statute of limitations clock with the IRS. Without filing, the IRS theoretically has forever to come after you if they think you should have filed. I learned this the hard way when my son didn't file for his first job and got a notice 3 years later. It was a headache to resolve even though he didn't actually owe anything.
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Reginald Blackwell
ā¢Is that really true? I thought if you don't owe any taxes, there's no penalty for not filing when you're under the threshold. Why would the IRS come after someone for not filing when they weren't required to?
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