Former university bursar office employee here! This happens ALL THE TIME. Schools are required to report payments in the calendar year they're received, not the academic year they apply to. Most likely explanation: you either made a payment in January 2021 for your final semester, or there was some kind of adjustment to your account in 2021 (refund, late scholarship, etc). Box 1 showing $875 means money changed hands somehow. Call the bursar's office (not financial aid) and ask for a detailed explanation of what triggered the 1098-T. They can pull up your account history and tell you exactly what happened. If it truly was issued in error, they can issue a corrected form. But honestly, it's probably accurate according to IRS reporting rules, just confusing from your perspective.

Quick question - what tax software are people using to handle these kinds of education credit issues? I've got a similar situation with a 1098-T from a school I transferred from, and TurboTax is giving me confusing results.

One thing nobody mentioned yet - check if you actually did receive prior notices. The IRS is required to send multiple notices before sending debt to collections. Pull your IRS account transcripts (can be done online) and it will show all notices sent to you. If they sent notices to an old address or there's no record of prior notices, that strengthens your case for abatement. Also, 1065 penalties are especially harsh because they're designed to enforce timely filing for information returns. The $195/month/partner can add up quickly, which explains your $4950 penalty for what seems like a simple mistake.

I hate to be the pessimist, but be prepared for this to take multiple attempts. I had almost identical partnership penalties last year and the first abatement request was denied despite having a clean record. Had to call back, escalate to a supervisor, and be very persistent. Eventually got it abated, but it wasn't the easy one-call fix some people are suggesting. The IRS is incredibly backlogged right now.

Has anyone used the IRS Tax Withholding Estimator on the official IRS website? I found it helpful for a similar situation.

Just to be clear, you're DEFINITELY not paying your employer's portion of payroll taxes. That's a completely separate thing that never shows up on your tax return. What you're experiencing is just the result of our progressive tax system when you have multiple incomes in a household. Each dollar of your income is essentially taxed at your highest marginal rate when added to your husband's income. So if his income put you in the 22% bracket, your additional income gets taxed at 22% (minus deductions). That's completely normal and how the system is designed to work, even though it can feel unfair.

Another important consideration: if your mom might need nursing home care in the next 5 years, transferring assets from her account to yours could create a huge problem with Medicaid eligibility. They look back 5 years at transfers, and this could be seen as trying to hide assets.

Don't forget to keep really good records of all home improvements your mom made over the years! This increases the basis of the home and reduces potential capital gains. Things like a new roof, kitchen remodel, finished basement, etc. Get as many receipts as you can find.

Be really careful with writing off your flip materials from your landscaping business! I did this exact thing and got audited. The IRS reclassified everything, disallowed my deductions, and hit me with penalties and interest. My $12k tax savings turned into a $20k+ nightmare. The IRS is pretty strict about keeping these activities separate. For flips, you should be tracking all costs (materials, labor, permits, etc.) and adding them to the property's basis. You'll recoup these when you sell. If you've already been writing these off as landscaping business expenses, consider filing amended returns before they catch it.

I'm a rental property owner and wanted to add: while you can't immediately deduct the materials for building your rentals, consider exploring the BRRRP strategy (Buy, Rehab, Rent, Refinance, Repeat). This lets you pull cash out after establishing equity, which is untaxed since it's debt, not income. Also, look into Qualified Business Income deductions for your rental activity if you can qualify as a "real estate professional" for tax purposes. With your construction background, you might meet the hours requirement. For your specific question about the flip materials you already deducted - that's problematic. Those should have been capitalized to the property's basis. Consider talking to a tax attorney about amendment options before an audit happens.