Has anyone dealt with a situation where the house significantly appreciated between death and sale? My situation is similar but we didn't sell right away and now there's a huge gain from the stepped-up basis to sale price.

I'm dealing with a very similar situation right now with my grandmother's estate. One additional thing to consider that hasn't been mentioned yet - if the property was used as a rental before your aunt passed, you may also need to deal with depreciation recapture on Schedule D. This gets reported as ordinary income rather than capital gains and can significantly impact the tax liability. Also, make sure you get a proper appraisal of the property as of the date of death to establish the stepped-up basis. The IRS may question the valuation later, especially with a $425,000 property, so having professional documentation is crucial. I learned this the hard way when they asked for supporting documentation during my grandmother's estate audit. For the K-1 distributions to 20 beneficiaries, consider whether any of them are minors or have special circumstances that might affect how they report their share of the gain. This can get complex quickly with that many people involved.

Something nobody's mentioned yet - you should check if the debt collector properly renewed the judgment. In most states, judgments expire after a certain period (often 7-10 years) unless the creditor files paperwork to renew it. If yours was from 2013 and they never renewed it properly, it might have expired. You can check this by contacting your county clerk's office and asking about any judgment renewals filed against you. If they didn't renew it and the original judgment has expired, you might be able to challenge the garnishment on those grounds. I went through something similar with an old credit card judgment from 2010. They tried to garnish my bank account in 2022, but I discovered they never renewed the judgment which expired after 10 years in my state. The court immediately terminated the garnishment order when I pointed this out.

Just want to add that if the majority of your income is from SSD, you might qualify to file Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness" which can help if you're considered insolvent. This might not stop the current garnishment but could prevent future tax consequences if some of your debt gets discharged. Also, many states have homestead exemptions or wildcard exemptions that protect certain amounts of your assets and income from creditors, even after a judgment. These vary dramatically by state though - where are you located? Might be able to point you to specific state resources.

Curious what tax software people recommend for filing the partial year returns after conversion? I'm going through this exact scenario and usually use TurboTax Business but not sure if it handles this situation well.

I appreciate everyone sharing their experiences here. Just want to add a few additional considerations that might help with your decision timing: 1. **Quarterly estimated taxes** - If you're making quarterly payments as a C Corp, converting mid-year will complicate your Q3 and Q4 estimates since you'll need to calculate them based on your new entity structure. 2. **Employee benefits** - If you have employees or provide yourself benefits through the C Corp (health insurance, retirement plans), these will need to be restructured. Some benefits that were tax-deductible for the C Corp might not be for an LLC. 3. **State franchise taxes** - Many states charge annual franchise taxes for C Corps that are calculated differently than LLC fees. Converting mid-year might still leave you liable for the full year's C Corp franchise tax in some states. The timing really depends on your specific situation, but given the complexity everyone's outlined here, waiting until your accountant returns might be worth the delay. Two weeks could save you from making a costly mistake, especially since you'll need professional help with those dual tax filings anyway.

Great question! This is actually a pretty common scenario for people with mixed income sources. The answer depends on how your employer handles your health insurance premiums. If your $420 is deducted pre-tax from your paycheck (which is most common), you've already received the tax benefit and can't deduct it again for your 1099 income. However, if it's deducted post-tax, you may be able to claim a partial self-employed health insurance deduction on Schedule 1 of your 1040 (not Schedule C). The deduction would be proportional to your self-employment income vs. total income. To check: Look at your pay stub - if the health insurance comes out before taxes are calculated, it's pre-tax. If it comes out after, it's post-tax. You can also verify by checking if your W-2 Box 1 (taxable wages) is lower than your gross pay by more than just the health insurance amount. Even if you can't deduct the health insurance, make sure you're tracking all your other legitimate business expenses for your consulting work - they add up quickly!

I had this exact same situation when I started doing freelance graphic design while working my regular job! The confusion about health insurance deductions with mixed income sources is so real. What really helped me was creating a simple spreadsheet to track everything - not just the health insurance question, but all my freelance expenses. I was surprised how much I could legitimately deduct once I started paying attention: software subscriptions, equipment depreciation, client meeting costs, even a portion of my home office space. For the health insurance specifically, I ended up working with a CPA who explained that since my employer premiums were pre-tax, I couldn't double-dip. But she helped me identify so many other deductions I was missing that it more than made up for it. The key thing I learned is to keep meticulous records from day one of your freelance work. Even small expenses add up over the year, and come tax time you'll be glad you tracked everything properly!

Has anyone had luck with state efiling for prior years? I know the IRS doesn't allow it, but I'm wondering if some states might have different rules? I'm in California if that matters.

I went through this exact same situation last year! Unfortunately, as others have mentioned, you really can't efile prior year returns through any service - it's just not allowed by the IRS regardless of who prepares them. What I ended up doing was printing my completed TurboTax returns and sending them via USPS Priority Mail with tracking. It actually wasn't as slow as I expected - my returns were processed within about 6-8 weeks, which is pretty standard for paper filing. One tip that helped me: I called the IRS processing center for my area about 3 weeks after mailing to confirm they received my returns. You can find the right number on the IRS website based on where you're mailing your returns. It gave me peace of mind knowing they actually got them and were in the system. The certified mail route that Connor mentioned is also a good option if you want extra proof of delivery, though it does cost a bit more than regular Priority Mail.