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.

That's a great point about checking the transcript for prior notices! I'll definitely do that. Our business did move offices in early 2023, and I'm now wondering if notices were sent to our old address even though we filed a change of address form. Is there a specific way to mention this when requesting abatement?

If your transcript shows notices were sent but you never received them because of an address issue, definitely mention that when requesting abatement. This falls under "reasonable cause" arguments. Specifically say: "We filed Form 8822-B to change our business address, but it appears notices were sent to our previous location. We never had the opportunity to respond to the original notices before this went to collections." The IRS is generally understanding about address issues, especially if you can show you tried to update your information properly. This would be in addition to requesting First-Time Abatement, giving you multiple angles for relief.

I second this. My first request was denied too, but second time worked. The key was getting actual IRS transcripts that proved we had good filing history. Just saying "we've always filed on time before" isn't enough - they want to see proof in their system.

16 That's a really good point! How did you handle the amounts on the 1099-NEC? Did you just report the check amounts or the total? I'm in this exact situation with a web designer I've been using.

21 I only reported the check amounts on the 1099-NEC I issued. The PayPal payments were handled by their 1099-K reporting. My accountant explained that if I included the PayPal amounts on my 1099-NEC, the contractor would have the same income reported twice to the IRS (once on my 1099-NEC and once on PayPal's 1099-K). It was a bit confusing because my tax software wanted me to enter the total paid to each contractor, and I had to manually adjust the reportable amounts. Definitely keep separate payment records by method for each contractor if you're using multiple payment types!

13 The $600 reporting threshold for third-party payment networks is supposed to be in effect for 2024 (filed in 2025). The IRS issued Notice 2023-10 for the delay that affected 2023 filings, but unless they issue a new notice, we should assume the $600 threshold applies for 2024 payments. It's always possible they'll announce another delay though.

Wait seriously?? I have to pay EXTRA tax on top of regular income tax? I thought the whole point of writing off the equipment was to pay less taxes. Does this mean I'll end up owing more than if I just didn't report the photography income at all?

You do need to pay self-employment tax, but don't panic! You'll still benefit from deducting your equipment expenses. Here's how it works: your business profit (income minus expenses) is what gets taxed. By deducting legitimate expenses like your camera equipment, you're reducing your taxable profit. Not reporting income isn't a good strategy. It's legally considered tax evasion, and the penalties can be severe if you're caught. Plus, reporting your business properly builds tax history that helps with things like qualifying for loans, retirement accounts, and health insurance. The short-term tax hit is worth the long-term benefits of having everything properly documented.

There's also Section 179 deduction that lets you deduct the full cost of equipment in one year up to a certain amount. I think it's like $1,080,000 for 2023 so way more than most photographers would spend!

Thanks, that's super helpful! I just checked my 1099-DIV and you're right - box 3 (return of capital) has a pretty significant number. Does this mean I've been potentially paying taxes on money I didn't need to?

Return of capital distributions (box 3) are not immediately taxable - they reduce your cost basis in the ETF instead. So if you bought UCO at $10 per share and received $1 per share as return of capital, your new cost basis would be $9 per share. You only pay taxes on return of capital if it reduces your basis below zero (which is rare), or when you eventually sell the shares. If you've been treating these distributions as taxable income, then yes, you've been overpaying your taxes. You might want to consult with a tax professional about filing amended returns for previous years.

Be careful with tax-loss harvesting and wash sale rules though! If you sell something at a loss and buy a "substantially identical" security within 30 days before or after, you can't claim the loss. The IRS definition of "substantially identical" can be murky with ETFs.