This is incredibly helpful! As someone new to tax filing, I really appreciate you breaking down the hierarchy and exceptions. The point about federal refunds being under review potentially switching the fee source to state is something I hadn't considered. I'm planning to file next week and will definitely ask them upfront which refund they'll use - better to know ahead of time than be surprised later when trying to balance my budget. Thank you for such a thorough explanation!

I've used both tax1099.com and Track1099 (different businesses), and honestly the state processing times were slow with both. I think it's just the state systems being outdated rather than the service you use to submit.

My accountant told me it's definitely a state issue, not a platform issue. He said even when they file through their professional software, state acceptances for 1099s are slow. Some states are actually printing them out and scanning them into another system! No wonder it takes forever.

That's a really smart approach with the spreadsheet! I'm definitely going to start tracking processing times by state. Do you happen to know if there's any pattern to when California processes these? Like are they faster at certain times of the month or year? Just trying to set better expectations for my own sanity next time around.

Thank you so much for sharing your real-world experience with this! It's both reassuring and terrifying to hear from someone who actually went through it. The idea that the IRS considers your basis reduced even when you never claimed the depreciation is mind-boggling - it really does feel like a penalty for not knowing about a rule that seems counterintuitive. Your point about documentation is especially helpful. I've been pretty good about keeping records of my home office setup and expenses, but I should probably go back and make sure I have clear documentation of the exact start date and square footage calculations. Better to have too much documentation than not enough when dealing with the IRS. The $3,200 you recovered by amending three years of returns definitely makes the paperwork hassle seem worth it. Did you handle the amendments yourself or did you end up working with a tax professional for that part? I'm trying to figure out if this is something I can tackle on my own or if I should bite the bullet and hire someone who knows these rules inside and out.

I handled the amendments myself using the calculations from one of the tools mentioned earlier in this thread (taxr.ai), but I had a CPA review everything before filing just to be safe. The amended returns themselves aren't too complicated once you have the correct depreciation amounts calculated - it's mainly updating Schedule C and Form 4562. The tricky part is making sure you get the depreciation calculation right in the first place. You need your home's original basis, the business percentage, and you have to use the correct depreciation method and timeline. If you're comfortable with tax forms and have good records, you can probably handle the amendments yourself. But given that you'll likely need professional help for the actual sale year anyway (with Form 4797 and the recapture calculations), it might make sense to establish that relationship now. One thing I wished I had done differently - I would have started the amendment process earlier. It took a few months to get the refunds processed, and I could have used that extra cash flow before the sale closed. The IRS isn't exactly speedy with amended return processing, especially during busy seasons.

Yes, stopping your home office use now would definitely be worth considering if you're selling in late 2025! You're absolutely right that it won't eliminate the depreciation recapture for the years 2021-2025 when you did use it for business, but getting that 2+ years of non-business use would allow you to claim the full primary residence exclusion ($250k single/$500k married) on your entire home. Without that 2-year conversion period, the business portion of your home (that 12%) would be excluded from the primary residence benefit, which could result in significant additional capital gains tax on top of the depreciation recapture. So even though you'll still owe the recapture tax on the allowable depreciation from your business use years, you'd avoid capital gains tax on what could be a substantial amount. Your calculation about recovering around $2,000 through amendments sounds about right for that timeframe and percentage. I'd definitely recommend getting those amendment calculations done soon since you mentioned selling in late 2025 - you'll want those refunds processed and want to have all your depreciation documentation organized well before the sale. The 2-year conversion rule is definitely one of those planning opportunities that more people should know about. Smart thinking on your part!

This is really helpful! I'm in a similar situation but with slightly different timing - we both started new jobs in September, so we're dealing with multiple W4 changes mid-year. When you say to coordinate all W4s as a household unit, do you mean I should leave my spouse's W4 completely basic (just married filing jointly) and put all the multiple jobs calculations and extra withholding on my highest-paying job's W4? Also, how do you handle it when one spouse gets irregular bonuses throughout the year - do those mess up the withholding calculations you set up?

Yes, exactly! Leave your spouse's W4 completely basic - just select "Married Filing Jointly" and don't fill out any of the multiple jobs sections or additional withholding amounts. Put all the coordination work on your highest-paying job's W4. For irregular bonuses, they can definitely throw off your calculations, but there are a few ways to handle it: 1. If you can estimate the bonus amounts for the year, include them in the IRS withholding calculator when you're setting up your W4 2. For truly unpredictable bonuses, you might want to run the calculator again after a large bonus and adjust your remaining withholding if needed 3. Another approach is to set your regular paycheck withholding to be slightly conservative (withhold a bit extra) to create a buffer for bonus-related underpayment Since you both started new jobs in September, you're actually in a better position than the original poster because you have fewer months of potentially incorrect withholding to catch up on. Just make sure when you use the IRS calculator that you input your year-to-date withholding from ALL jobs (including any previous employers from earlier this year) so it can calculate the right adjustment for your remaining paychecks. The mid-year job changes actually make it more important to coordinate your W4s this way, since the new employers' payroll systems have no idea what was withheld at your previous jobs.

This is exactly the kind of comprehensive advice I was hoping to find! I'm dealing with a very similar situation and have been getting conflicting guidance from different sources. Your point about the timing differences between the calculation methods makes so much sense - I hadn't considered that the IRS calculator is trying to catch up on the year-to-date shortfall while other methods are just looking at annual amounts. One follow-up question: when you say to put ALL the extra withholding on the highest-paying job's W4, should I also be coordinating the "multiple jobs" checkbox in Step 2c across all three W4s, or just handle everything through the additional withholding amount in Step 4c? I've been afraid to check that box because I wasn't sure if it would create double-counting if multiple jobs had it checked. Also, for the itemized deduction update in Step 4b - do I put the full amount of our itemized deductions there, or just the amount that exceeds the standard deduction? The form instructions aren't super clear on this point.

Thanks for mentioning Box 2a! I do have a small amount there ($12.45) that I'm reporting on Schedule D. And yes, I did get a notification about the liquidation. It was for a small REIT position I had that was bought out. I think what confused me is that the brokerage also reported it as a normal sale on my 1099-B, so I wasn't sure if I needed to do something with Box 9 on the 1099-DIV separately or if it was already factored into the sale proceeds on the 1099-B.

That makes sense - in this case, you need to be careful not to double-report the income. If the liquidation is already reported on your 1099-B as a sale, you should use that to report the transaction on Schedule D. The amount in Box 9 of your 1099-DIV is informational to help you understand why the sale occurred. Double-check the 1099-B to make sure the basis is reported correctly. If the REIT was bought out, you'll want to make sure your gain/loss calculation is accurate. Sometimes in these situations, you might need to make adjustments if the basis on the 1099-B doesn't properly account for all your previous investments and reinvested dividends.

What's the easiest way to keep track of these basis adjustments over multiple years? My broker doesn't seem to do it automatically.

I use a simple spreadsheet to track this. Create columns for: stock symbol, original purchase date, original cost basis, running total of nondividend distributions received, and adjusted basis (original basis minus total distributions). Update it each year when you get your 1099-DIVs. Some people also use portfolio tracking software like Quicken or just keep a running note in their tax files. The key is being consistent about it every year - don't wait until you sell to try to reconstruct the history!