To add some practical perspective on 704(c) vs 743(b): I'm a tax accountant working primarily with real estate partnerships. 704(c) affects ALL partners when someone contributes property - it's about allocating the "pre-contribution" gain/loss to the right partner. 743(b) only affects the purchasing partner when an interest is sold - it's about making sure they don't get taxed twice on value they've already paid for. Most of our clients get confused because both address disparities between basis and value, but they operate very differently in practice. Common mistake: thinking you can just choose whichever is better - but 704(c) is mandatory while 743(b) is optional via the 754 election.

I'm confused about something basic here. If I buy into a partnership for $100k, but my share of the partnership's assets' tax basis is only $60k, does the 743(b) adjustment just give me an extra $40k of basis that only I get to use?

Long-time practitioner here. Everyone's giving software advice but honestly, the most important factor isn't which software but how much training you get on it. I've used ATX for 15 years and it handles everything from basic to complex returns, including multi-state and PTE. Look for a software company that offers comprehensive training and excellent support during tax season. ATX may not be as flashy as some others, but their support is top-notch, and that matters more than anything when you're in the middle of a complex return with a deadline looming.

Don't overlook Lacerte if you're planning to grow into complex returns. Yes, it's pricier than Drake, but there's a reason most large practices use either Lacerte or Ultra Tax for complex work. I switched from Drake to Lacerte 3 years ago and would never go back. The time savings on complex returns more than pays for the higher cost. Multi-state returns are much easier, and the PTE handling is stellar. The tax research integration alone saves me hours on tricky situations.

Just want to add something important that nobody mentioned yet - as a single parent student with a child under 17, you might qualify for the Child and Dependent Care Credit too! This is different from the regular Child Tax Credit. If you paid someone to watch your daughter while you attended classes or studied, those expenses might qualify for this credit. It doesn't matter that your income came from Pell Grants rather than a job. The credit is worth up to 35% of $3,000 in care expenses for one child. I'm a single dad and student, and this credit made a huge difference for me last year. Don't forget to get the provider's tax ID number and keep good records of what you paid them throughout the year.

Something nobody mentioned - if you're a student with a dependent, check if you qualify for "Head of Household" filing status! This gives better tax rates and a higher standard deduction than filing as single. You need to pay more than half the cost of keeping up a home where both you and your qualifying person (your daughter) lived for more than half the year. Even if your money came from Pell Grants and loans, it still counts for this purpose!

Slightly off topic but important: make sure you're setting aside money for quarterly estimated tax payments next year if you continue the side hustle. The IRS wants you to pay taxes as you earn income, not just at tax time. I learned this the hard way and got hit with an underpayment penalty my first year doing freelance work. Since this is your first year with significant side income, you'll probably be fine for this year due to the safe harbor rules (especially if your W-2 withholding covers your total tax bill), but keep it in mind for next year!

just fyi my spouse started an education consulting side hustle last year and we looked into the llc thing. ended up not being worth it for under 10k in income cause the filing fees + extra tax prep costs ate up the small savings. our tax guy said just having good records of expenses was way more important than the business structure at that income level. we track everything in quickbooks self-employed now, makes schedule c super easy to fill out.

The most important thing, OP, is to start filing current tax returns correctly going forward. Don't let this year become another unfiled year while you're dealing with the past ones. I say this from experience - each new unfiled year just digs the hole deeper. I made this mistake and ended up with 6 years of unfiled returns. The way I dug out was to: 1) File current year properly 2) Work backwards on the old returns one by one 3) Call the IRS and get on a payment plan Remember that independent contractors should typically be making quarterly estimated tax payments. Set that up right away for 2025 so you don't keep adding to the problem.

Has anyone mentioned the statute of limitations on this? IRS generally has 10 years to collect from the assessment date. If some of these taxes are from 10 years ago, maybe some of this debt is approaching expiration?