Don't forget to consider state taxes too, not just federal! I paid off my federal taxes from my old LLC but completely overlooked the state tax debt. When I went to register my new LLC, I discovered my state (California) wouldn't let me form a new business entity until I cleared the old tax debt with the state franchise tax board. Had to delay my launch by 2 months while dealing with that mess. Different states have different rules, so check your specific state's requirements before spending money on new LLC formation.

This is such a common situation for entrepreneurs trying to get back on their feet! I went through something similar when my consulting LLC failed in 2022 and I owed about $8,500 in back taxes. The good news is that you absolutely can form a new LLC while owing taxes from your old one - the IRS doesn't block business formation. However, you need to be strategic about it. The key things I learned: 1. Set up your new LLC properly with completely separate finances - different bank, different EIN, clear documentation of startup capital 2. Address the old debt proactively rather than ignoring it - even a basic installment agreement shows good faith 3. Keep detailed records showing the two businesses are completely separate entities I ended up calling the IRS (after many failed attempts) to set up a payment plan for the old debt before launching my new business. It gave me peace of mind and prevented any collection actions that could have interfered with getting business banking or credit for the new venture. The worst thing you can do is try to hide from the old debt - it won't go away and could create bigger problems down the road. But don't let it stop you from pursuing your new business opportunity either!

I'm in a very similar situation and this thread has been a lifesaver! My husband and I have been filing Schedule C for our LLC for the past two years, completely unaware that we needed to file Form 1065 as a partnership. After reading everyone's experiences, I have a couple of specific questions: 1. When filing the late Form 1065, do you need to pay the partnership filing fee for each year, or are there any waivers available for first-time filers who made honest mistakes? 2. Has anyone dealt with state-level implications? We're in California and I'm wondering if we need to file corrected state partnership returns as well, or if this is just a federal issue. 3. For the amended personal returns (1040-X), how long did it typically take to get your refunds processed? Since we'll be removing Schedule C income and adding K-1 income, I'm hoping there might be some refund due to different deduction treatments. I'm planning to be proactive about this like many of you recommended, but want to make sure I understand all the moving pieces before I start filing corrections. The penalty abatement options you've mentioned give me hope that this won't be as financially devastating as I initially feared!

I've been following this thread closely as I'm dealing with a similar situation. My husband and I have had an LLC for three years and just realized we've been filing everything wrong with Schedule C instead of Form 1065. One thing I wanted to add that might help others - when you're preparing your reasonable cause letter for the IRS, be very specific about WHY you made the mistake. Don't just say "I didn't know" - explain exactly what led to the confusion. For example: "As first-time LLC owners, we relied on [specific tax software] which automatically directed us to Schedule C filing without asking about the number of LLC members or explaining partnership filing requirements for multi-member LLCs." Also, I've noticed several people mention First-Time Penalty Abatement, which is great, but remember you can only use this once every three years and only if you've been compliant with filing and payment requirements for the prior three years. If you've had other tax issues recently, you might not qualify. For those worried about the complexity - I started trying to handle this myself but quickly realized I was in over my head with multiple years of corrections. Ended up hiring a CPA who specializes in small business taxes and it's been worth every penny for the peace of mind alone. The key takeaway from everyone's experiences here seems to be: act fast, be proactive, and don't try to hide from the IRS. They're surprisingly reasonable when you come to them first with a good explanation and a plan to fix things.

As an immigrant myself, I know how confusing US tax system can be! One more thing to know: those 401k statements usually show both contributions and earnings. The earnings (interest/investment gains) aren't taxed now either as long as u keep the money in the account. That's why these accounts r good for retirement saving!

Welcome to the US tax system! As someone who also moved here recently, I totally get the confusion. Just want to add one more thing that might help - when you get your tax software or work with a preparer, make sure they know about your mid-year start date in October. Since you only worked part of the year, your income might be lower and that could affect things like which tax bracket you're in or if you qualify for certain credits. Also, if you're still on a visa (not a green card holder yet), there might be additional forms you need to file depending on your status. The IRS has specific rules for non-resident aliens vs resident aliens for tax purposes. Good luck with your first US tax return!

Another option if you're still stuck is to check with your tax preparer or CPA if you used one during the years around when you purchased the stock. Sometimes they keep copies of old tax returns that might have records of dividend income from that stock, which could help establish when you owned it and potentially give clues about your purchase timing. Also, don't forget to check your old bank statements if you still have access to them online. Many banks keep records going back 7+ years, and you might find the withdrawal or transfer that funded the stock purchase. Even if it doesn't give you the exact cost basis, it could help narrow down the purchase date and amount, which you can then cross-reference with historical prices. The key thing is to document whatever method you use and keep records showing you made a good faith effort. The IRS is generally reasonable about these situations when you can show you tried to find the actual information.

I went through something very similar about two years ago with an old Fidelity account. What ended up working for me was a combination approach that might help you too. First, I contacted Schwab's customer service and specifically asked to speak with someone in their "account reconstruction" department - apparently they have specialists who deal with exactly these kinds of missing cost basis issues from acquisitions. The regular customer service reps couldn't help, but this specialized team had access to more historical TD Ameritrade data than what shows up in your online account. When that didn't get me everything I needed, I used the IRS's own guidance from Publication 551. They actually have a section that covers "Unknown or Indeterminable Cost" and provides a framework for making reasonable estimates. The key is being able to show you made a good faith effort to find the actual information. I ended up creating a simple spreadsheet documenting: 1) All the places I looked for records, 2) The approximate timeframe I remembered buying (even if it was just "sometime in 2011-2012"), 3) Historical price data from that period, and 4) My reasoning for the estimate I used. I attached this as a statement with my tax return. The IRS never questioned it, and my CPA said this approach shows due diligence while being conservative about not understating the tax owed. Much better than using zero and overpaying significantly.

Has anyone here actually gotten audited specifically about S Corp health insurance treatment? I'm curious what the real-world risk is. I've been just paying health insurance personally and taking the self-employed health insurance deduction without running it through my S Corp payroll at all... which I'm now realizing might be incorrect after reading this thread.

Thanks for sharing your audit experience - that's exactly the kind of real-world insight that's helpful! It sounds like the IRS is definitely paying attention to this area. For anyone in a similar situation to @Sasha Ivanov, you'll want to correct this for future years. The proper flow should be: S Corp pays or reimburses health insurance premiums → those amounts get added to your W-2 as wages (but not subject to FICA/FUTA) → you then take the self-employed health insurance deduction on your personal return. Just paying personally and taking the deduction skips the crucial W-2 reporting step that the IRS expects to see. It's one of those things that might fly under the radar for a while, but if you do get audited, it's an easy thing for them to catch since the deduction on your personal return won't match up with any corresponding W-2 wages. The good news is this is usually fixable by amending prior year returns if needed, though you'll want to consult with a tax professional about the best approach for your specific situation.