I went through almost this exact same situation two years ago! My employer's payroll system completely missed reporting my $4,800 in dependent care FSA contributions in Box 10 of my W-2, even though the deductions showed up on every paystub. Here's what I learned after consulting with a tax professional: You should absolutely enter your W-2 exactly as received (option 2). Never manually alter W-2 information in tax software. When you get to the child care expenses section, you'll report your full $9,300 in expenses AND separately report the $6,200 FSA contribution. The software will automatically calculate that only $3,100 is eligible for the credit. I was nervous about the discrepancy too, but my tax pro explained that this is incredibly common and the IRS systems are designed to handle it. Form 2441 exists specifically to reconcile situations where employer reporting might be incomplete or incorrect. Make sure to keep copies of your wife's paystubs showing the FSA deductions, any FSA enrollment documentation, and statements from the FSA administrator. I kept a folder with all this documentation and thankfully never needed it, but having it gave me peace of mind. The bottom line is that your approach shouldn't change just because your employer made a reporting error. You're still entitled to the proper tax treatment - you just need to report it correctly on your return regardless of what Box 10 shows.

I'm going through something very similar right now! My employer also failed to report my $5,500 dependent care FSA contribution in Box 10 of my W-2, and I've been stressed about how to handle it correctly. Reading through all these responses has been incredibly helpful - especially hearing from people who have actually dealt with this situation before. It sounds like the consensus is clear: enter the W-2 exactly as received and report the FSA contributions separately on Form 2441. What really put my mind at ease was hearing from Fatima about her experience going through this exact scenario with a tax professional's guidance, and from NebulaNova's friend who successfully handled an IRS inquiry about FSA discrepancies just by providing the proper documentation. I'm definitely going to keep all my paystubs showing the FSA deductions, my enrollment paperwork, and the year-end summary from my FSA administrator. It's reassuring to know that these employer reporting errors are common and that the IRS systems are set up to handle them properly. Thanks everyone for sharing your experiences and advice - this thread has been a lifesaver for reducing my tax season anxiety!

I went through this exact situation with some worthless biotech stocks from 2012. Unfortunately, you're right that amending returns from over 10 years ago isn't an option anymore - the IRS only allows amendments within 3 years of the original filing date (or 2 years from when you paid the tax, whichever is later). Having your broker remove the shares won't create a current-year tax loss either. The loss needs to be recognized in the year the stock actually became worthless, not when it's removed from your account. However, there might be one legitimate option: if you can document that you never had a reasonable opportunity to discover the stock was worthless during the proper timeframe (maybe the company kept filing reports or your broker continued showing it as active), you could potentially file Form 8082 with a detailed explanation. This is a long shot and would likely trigger IRS scrutiny, but it's within the tax code. Before going that route, I'd suggest consulting with a tax professional who specializes in securities transactions. The potential tax savings need to be weighed against the cost and risk of an IRS inquiry.

I dealt with a similar situation a few years back with some energy company stocks that went to zero around 2010. What worked for me was proving that the broker continued to show the securities as "active" in their system even after they became worthless, which prevented me from realizing I could claim the loss. The key documentation I used was: (1) historical broker statements showing the stocks were still listed with minimal prices like $0.0001 rather than marked as "worthless," (2) proof that the companies continued filing quarterly reports with the SEC even while essentially defunct, and (3) evidence that the broker never sent any notification about the securities becoming worthless. I filed Form 8082 along with a detailed letter explaining that the broker's continued listing of these securities with nominal values misled me into thinking they retained some potential value. The IRS accepted it after about 8 months of back-and-forth correspondence, but I had to provide extensive documentation. The process was stressful and required working with a CPA who specialized in these situations, but ultimately I was able to recover about $12,000 in capital losses that I thought were gone forever. Just make sure you have rock-solid documentation before going this route.

The distinction about whether you're selling now is crucial. If you haven't sold yet, you have time to pursue the late Section 754 election before any taxable event occurs. This gives you significant leverage. One thing I haven't seen mentioned yet - consider getting a current appraisal of the partnership assets to establish the potential tax savings from the late election. This helps justify the costs of pursuing relief and strengthens your case with the IRS by showing the magnitude of the inequity if relief isn't granted. Also, check if the partnership agreement has any provisions about basis adjustments or elections. Sometimes partnerships have language that could support your position or require the partnership to cooperate with beneficiaries on tax matters. The general partners have a fiduciary duty to act in the best interests of all partners, which could include helping you get this election filed if it benefits the partnership overall. Have you confirmed who the current general partner is and whether they're willing to cooperate with filing the late election request? That's really your first hurdle - without their cooperation, your options become much more limited.

Great to hear your uncle is willing to cooperate! That's half the battle right there. Since you have time before any sale, you're in a much better position than most people dealing with this issue. A few additional thoughts as you move forward: Make sure to document everything about why the original election wasn't filed in 2008. The IRS wants to see that the failure was due to reasonable cause, not neglect. Your uncle's comment about "nobody understanding the tax implications" could actually work in your favor if properly documented - it shows good faith rather than intentional avoidance. When you get that appraisal, try to get one that shows values both at your grandmother's death in 2008 and currently. This creates a clear timeline showing the appreciation that occurred before vs. after your inheritance, which strengthens your equity argument. Also consider having a tax attorney review your case before submitting the relief request. The stakes are high enough that professional help with the 301.9100-3 request could save you significant money in the long run. The IRS scrutinizes these requests carefully, and having it properly prepared increases your chances of approval substantially. You're in a much better spot than your original post suggested - having cooperative family members and time to plan makes all the difference!

This is such a helpful thread! I've been dealing with a similar situation after relocating from New Jersey to Florida for my job. What's been tricky is that I still travel back to NJ frequently for work and to visit family, so I'm probably there about 80-90 days per year. One thing I learned the hard way is that New Jersey has what they call a "safe harbor" rule - if you can prove you were a non-resident for the entire tax year AND you spent fewer than 183 days in NJ, you're generally in the clear. But they're really strict about the day counting, and they include any part of a day as a full day. I started keeping a detailed travel log in a simple Excel spreadsheet with dates, locations, and reasons for travel. My tax preparer said this kind of documentation is gold if you ever get audited. Also found out that flight records and hotel receipts can serve as backup documentation for your physical presence claims. The other thing that caught me off guard was that NJ looks at whether you maintained a "permanent place of abode" in the state. Even if you rent out your old house, if you have access to it (like keeping keys or having family there), they might still consider it available for your use. Had to get a formal rental agreement that explicitly prohibited my access to the property to clean this up.

This has been such an eye-opening discussion! As someone who's been considering a move from a high-tax state to a low-tax one, I had no idea the residency determination process was this complex and thorough. The detail about keeping a daily log of physical presence is something I never would have thought of, but it makes total sense from an audit perspective. And the fact that states can look at everything from Amazon delivery addresses to veterinary records for pets is honestly both impressive and a little concerning from a privacy standpoint. One question I have after reading all these experiences - for people who work remotely and have genuine flexibility about where they live, are there any states that are particularly "friendly" to new residents in terms of not being overly aggressive with residency audits? Or conversely, are there states that are known for being especially difficult even when someone has legitimately moved? It sounds like California, New York, and New Jersey are pretty notorious for aggressive enforcement, but I'm curious if there are states on the other end of the spectrum that are more welcoming to newcomers establishing residency. Also, has anyone dealt with the situation where you need to file as a part-year resident in multiple states during a move year? I'm wondering how complicated that gets and whether it's worth timing a move to coincide with the tax year.

This is such a helpful thread! I'm a CPA who works with a lot of small partnerships, and I see this confusion about Form 8825 and Form 1065 line 16 constantly. A few additional points that might help: 1. Make sure you're using the correct depreciation method for each asset type. Most residential rental property uses straight-line over 27.5 years, but some improvements might qualify for different recovery periods. 2. For your roof and HVAC improvements - these are definitely capital improvements that need to be depreciated separately. The roof would typically follow the same 27.5-year schedule as residential rental property, but HVAC systems often qualify for 15-year depreciation. 3. Don't forget about the mid-month convention for real estate - depreciation starts in the middle of the month the property was placed in service, regardless of the actual date. 4. Keep detailed records of when each improvement was completed and placed in service. The IRS is particularly strict about depreciation start dates. One thing I always tell my clients is to create a depreciation schedule spreadsheet that tracks each property and improvement separately. This makes it much easier to complete Form 4562 and ensures consistency between Form 8825 and Form 1065. If you're planning to continue doing your own returns, investing in proper fixed asset tracking software (like some mentioned here) really pays off in the long run. The initial setup takes time, but it prevents a lot of headaches later!

Just wanted to add something that might help with the Form 4562 requirement that several people mentioned. When you're preparing Form 4562 for your partnership, make sure to complete Part III (MACRS Depreciation) for your rental properties and improvements. The key sections you'll need are: - Line 19a-c for your 27.5-year residential rental property (buildings) - Line 19d for any 39-year nonresidential property if applicable - Lines 17-18 for any shorter recovery period assets (like certain improvements) One thing that trips up a lot of people is that you need to list each individual asset or group of similar assets separately on Form 4562, not just lump everything together. So your new roof and HVAC system should each be listed as separate line items with their respective placed-in-service dates and costs. Also, don't forget that the totals from Form 4562 should tie to both your Form 8825 line 18 AND your Form 1065 line 16 (assuming you only have real estate assets as discussed earlier). If those numbers don't match, you know there's an error somewhere in your calculations. The Form 4562 instructions are actually pretty detailed if you need help with the specific lines - they include examples for rental property that can be really helpful for first-time filers.