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I went through something similar in 2023. My advice: get a tax professional. I tried doing it myself and made things worse. Found a CPA who specializes in unfiled returns and IRS problems, and it was worth every penny. For the garnishment specifically, once you file those missing returns, you might qualify for a hardship reduction or removal. If you're actually owed refunds as you suspect, that will help your case tremendously. The CPA can file Form 911 (Taxpayer Advocate Service) to help expedite the garnishment release if you're experiencing financial hardship because of it. Don't beat yourself up about the delay - the pandemic was rough on everyone's mental health. Just focus on fixing it now.
How much did the CPA charge you for handling multiple years of unfiled returns? I'm in a similar situation but worried about the cost.
For three years of unfiled returns plus dealing with a lien (similar to garnishment), I paid about $1800. But honestly, it varies widely depending on your location and complexity. My situation included self-employment income and the tax pro had to reconstruct some missing records. The initial consultation was free, which helped me understand what I was getting into before committing. Many tax pros will work out payment plans too, especially if you're already in financial distress. Don't let potential costs stop you from at least talking to someone - most will give you a price estimate during the first conversation.
Don't panic! The good news is that if you've been overpaying and are due refunds, once you file those returns, you might actually come out ahead. But you need to act quickly because there's a 3-year limit on claiming refunds. For the house sale, make sure you have documentation for any improvements you made to the property while you owned it. These increase your basis and can reduce any capital gains. If it was your primary residence and you lived there at least 2 of 5 years before selling, you probably qualify for the capital gains exclusion ($250k for single, $500k for married filing jointly). I've used TurboTax to file back taxes before and it was pretty straightforward. They keep previous years' versions available. If your situation is complicated though, hiring a pro might save you money in the long run.
TurboTax is great but wouldn't a professional be better for dealing with the garnishment? That seems like the urgent problem here.
Something nobody's mentioned - make sure you don't file an AMENDED return (Form 1065X) just to add the missing Schedule B-2! That's overkill and could create confusion. Just send the missing schedule with a cover letter as the first commenter suggested. I made the mistake of filing an amended return for a similar situation last year and it created a huge headache.
Has anyone tried using one of the partnership tax support lines? I called the Business & Specialty Tax Line (800-829-4933) for a similar issue and they were actually pretty helpful, though I had to wait on hold for about an hour. They told me exactly where to mail my missing schedule and what to write on it.
Since you mentioned having ADHD as a disability, you might qualify for an IRS penalty waiver under "reasonable cause." Keep documentation from doctors about your condition. When filing your late return, include a brief, clear letter explaining how your ADHD and depression prevented you from filing on time. I went through something similar with my autism diagnosis and they waived most of my penalties. Don't be afraid to advocate for yourself!
This is so helpful - I never thought about using my diagnosis as part of explaining the late filing. Do you have any tips on what specific wording worked for you? I'm worried about explaining it wrong.
Focus on how your specific symptoms impacted your ability to complete tasks like tax filing. In my letter, I explained how executive dysfunction made organizing financial documents overwhelming, and sensory processing issues made working with numbers for extended periods impossible during certain times. Be straightforward and factual. Something like: "Due to diagnosed ADHD and depression, I experienced severe executive dysfunction during [time period]. Despite my attempts, I was unable to organize financial information and complete tax filing processes. I am now receiving appropriate treatment and have implemented systems to ensure timely filing going forward." Attach a brief letter from your healthcare provider confirming your diagnosis and treatment timeline if possible. Keep it under one page total, and include your contact information and tax ID number on the letter.
hey just want to mention that the IRS has a special form for claiming mental health as reasonable cause for late filing. Use Form 843 "Claim for Refund and Request for Abatement" along with your explanation. make sure u check box 4a for reasonable cause.
That's not right. Form 843 is only for requesting abatement of certain penalties AFTER you've filed your return and received a penalty notice. It doesn't apply to unfiled returns. The OP needs to file their returns first, then address penalties if they receive a notice.
What tax software are you using? This is actually a common enough issue that some of the better tax programs have a workflow for it. I know for sure that ProSeries and Lacerte (professional software) handle this situation, but I think even TaxAct has a way to deal with incorrect 1099s.
Right now I'm using TurboTax Business for the partnership return and regular TurboTax for my personal. I looked through both and couldn't find any specific option for "incorrect 1099-NEC issued to individual instead of business." Do you know if TurboTax has this capability somewhere?
TurboTax isn't great at handling this specific situation. In TurboTax Business, you'll need to manually enter the 1099-NEC income as "income not reported on a 1099" since you technically don't have a 1099-NEC issued to the LLC. For your personal TurboTax return, you'll need to enter the 1099-NEC, but then add a negative "Other income" line on Schedule C with a description like "Income reported on Partnership Form 1065" to offset it. Make sure to include an explanation statement with both returns. If you're doing this more than one year, I'd honestly recommend switching to TaxAct or even paying a professional to use Lacerte, as they have specific workflows for this exact scenario.
Has anyone here actually gotten an AUDIT because of this issue? I'm in the same boat (with Lyft incorrectly issuing to me vs my LLC) and I'm wondering about the real-world consequences if I just report it on my Schedule C instead of going through all this offset business.
I can share what happened to me. I didn't handle an incorrect 1099 properly in 2022 (just reported it on Schedule C), and I got a CP2000 notice from the IRS about a year later because the K-1 income from my partnership didn't match what they expected based on the 1099s. Took about 4 months and several letters to resolve. Not a full audit but definitely a headache.
Bethany Groves
Does anyone know if the Wage and Income Transcript shows state tax info too? Or is it just federal? I created my account and can see all my federal stuff but nothing for state taxes.
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Rebecca Johnston
ā¢Adding to what the other person said - some states automatically get the federal info and will flag discrepancies if your state return doesn't match what the IRS has. That's how I got caught missing a small 1099 last year. The feds didn't catch it but my state did!
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Bethany Groves
ā¢Thanks for the clarification! That makes sense. I'll check if my state has a similar portal. Just wanted to make sure I wasn't missing something in the IRS account.
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Nathan Dell
Just a heads up to everyone - make sure you're actually on the real IRS website when setting up ID.me. My brother thought he was creating an account but it was some phishing site. Go directly to IRS.gov and navigate from there rather than clicking links in emails or search results.
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Maya Jackson
ā¢This happened to my mom too! She got an email claiming to be from "IRS online services" with a link to "set up your account" and it was totally fake. Always go directly to irs.gov!
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Nathan Dell
ā¢Exactly! The official way is to go to IRS.gov and look for "Sign into your Online Account" - anything else might be sketchy. My brother was lucky his credit card company flagged the charges that showed up after he entered his info on the fake site.
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