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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.
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!
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.
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!
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.
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.
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.
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.
Ev Luca
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
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Ev Luca
ā¢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.
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Ev Luca
ā¢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.
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Ev Luca
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.
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Ev Luca
ā¢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.
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