I had a similar situation with a utility easement last year. One thing to keep in mind is that you should also check if your state has any specific requirements for reporting easement payments, as some states treat these differently than federal taxes. Also, make sure you keep all the documentation from the utility company - not just the 1099-S, but any agreements, surveys, or correspondence about the easement. The IRS may want to see proof of exactly what rights you granted and whether it's truly permanent. Some easements that are called "permanent" actually have conditions that could make them temporary in certain situations. If you do end up with a capital loss like others mentioned, remember that capital losses can only offset $3,000 of ordinary income per year, but any excess can be carried forward to future years. So even if you can't use the full loss this year, it's still valuable for future tax planning.

Based on your situation, you're handling this correctly! Since you received $26,500 for a permanent easement covering 15% of your property, and your allocated basis would be around $48,000 (15% of $320,000), you actually have a capital loss of approximately $21,500. Here's what you need to do: 1. Report this on Form 8949 as a sale transaction with the date you granted the easement as the "sale date" 2. Use your property purchase date as the "acquired date" 3. Enter $48,000 as your basis (15% allocation method) 4. Enter $26,500 as the proceeds 5. The resulting $21,500 loss carries to Schedule D Even though there's no taxable gain, you must still report the transaction since the IRS received a copy of your 1099-S. The good news is this loss can offset other capital gains or up to $3,000 of ordinary income per year, with any excess carrying forward. Make sure to keep detailed records showing how you calculated the 15% allocation of your basis, as the IRS may question this if audited. Some taxpayers use the percentage of acreage affected, while others use appraisals to determine the before/after value method mentioned by other commenters.

Just wanted to add something important - when we had our ITIN rejected, we learned that timing matters! If you submit your W7 with your tax return during the peak filing season (February-April), the processing time can be much longer than the estimated 11 weeks. We resubmitted in June after our initial rejection, and got the ITIN in about 7 weeks instead of 11. If your tax situation allows for it (like if you're getting a refund or don't owe much), consider filing an extension and then submitting when the IRS isn't as swamped.

I went through this exact situation last year! The TAC verification route is definitely your best bet - I was terrified to mail my wife's original passport too. One thing I learned that might help: when you call for the TAC appointment, ask specifically about their ITIN verification hours. Some locations only do ITIN services on certain days or during specific time slots, so you want to make sure you're booking during those times. Also, bring copies of everything in addition to the originals. The agent will verify the originals but keep copies for their records. And definitely bring that rejection letter you received - it helps the agent understand exactly what went wrong the first time. The 11-week timeline is frustrating, but once you get that stamped W7 from the TAC, you're in much better shape. Just make sure your tax return is completely filled out and accurate before you go to the appointment, because they'll review both documents together.

This is such a helpful discussion! I'm dealing with a similar family loan situation and the complexity around interest reporting has been really confusing. One thing I'm still not clear on - several people mentioned that the lender needs to report interest income annually even if it hasn't been received yet, but others said cash-basis taxpayers only report when actually received. Is this contradiction because family loans have special rules, or am I missing something? Also, for those who used the interest-only payment structure that StarSeeker mentioned - how did you handle the situation if the borrower is a full-time student with very limited income? Even $300/month in interest payments could be challenging. Did anyone build in graduated payment schedules or deferral options for the student years? I'm trying to balance keeping everything IRS-compliant while also being realistic about what a grad student can actually afford to pay during their studies.

I went through something very similar when my nephew needed funding for law school. After consulting with a tax attorney, we learned that the safest approach is to structure regular interest payments from the beginning, even if they're modest during the school years. What we ended up doing was creating an interest-only loan during his three years of school (about $200/month for a $60K loan), then switching to principal and interest payments once he graduated and got his first job. This kept the annual tax reporting clean and simple - my brother just reported the actual interest received each year on Schedule B. The key insight from our attorney was that trying to defer all interest to the end actually creates more complications, not fewer. The IRS has specific rules about "below-market loans" that can apply even when you're using the correct AFR rate if the payment structure looks like you're trying to avoid current taxation. We documented everything with a proper promissory note that included the current AFR rate, specified monthly payment amounts, and included provisions for what would happen if he couldn't make payments during school (temporary interest-only periods, with missed payments added to principal). Having that flexibility built in upfront prevented any issues when he had a tight month or two. The annual 1099-INT filing was actually pretty straightforward - just the total interest actually paid that year. Much simpler than trying to deal with imputed interest calculations or potential IRS questions about deferred payment structures.

One thing I haven't seen mentioned yet is the impact on cryptocurrency investments. If you're paying fees to crypto exchanges or using crypto tax software, those expenses also fall under the same rules - generally not deductible anymore as miscellaneous itemized deductions. However, if you're mining crypto or treating it as a business activity (not just investing), some of those expenses might still be deductible as business expenses on Schedule C. The key is proving it's a legitimate business activity rather than just investment. Also, for those with complex portfolios, don't forget about the net investment income tax (NIIT) - the 3.8% surtax on investment income for higher earners. While you can't deduct most investment expenses anymore, you can still offset investment income with investment losses to reduce your NIIT exposure. It's not the same as getting a deduction, but it's something to consider when rebalancing your portfolio for tax efficiency.

Building on the crypto discussion, I want to highlight something that caught me off guard during my 2024 tax prep - wash sale rules now apply to crypto too! This became really relevant when trying to optimize what few investment-related tax benefits we still have. If you're harvesting crypto losses to offset gains (since we can't deduct most investment expenses anymore), you need to be careful about repurchasing the same or "substantially identical" cryptocurrency within 30 days. While the IRS hasn't clearly defined what constitutes "substantially identical" for crypto, many tax professionals are advising caution. I learned this the hard way when I sold Bitcoin at a loss in December and bought it back 2 weeks later thinking I was being smart about tax loss harvesting. My CPA flagged it as a potential wash sale, which would defer the loss deduction. Since we've lost most other investment expense deductions, tax loss harvesting has become even more critical for managing investment tax liability. Just wanted to share this heads up since crypto wash sales seem to be flying under the radar for many people, and it can really impact your overall investment tax strategy when combined with the new limitations on deductible expenses.

Great thread! I'm dealing with a similar situation and wanted to add another perspective. I've been running my consulting business as an S Corp for 3 years now, and about 60% of my 1099s come in my personal name despite having an LLC. One thing I'd emphasize that hasn't been mentioned much - make sure you're issuing yourself W-2 wages from your S Corp! This is a requirement that some people miss. The IRS expects S Corp owners who work in the business to pay themselves a "reasonable salary" through payroll before taking distributions. For a $68k contract like the original poster mentioned, you'd probably need to pay yourself at least $30-40k in W-2 wages. Also, regarding the documentation everyone's talking about - I create a simple spreadsheet each year showing all my 1099 income sources, which ones were issued to my personal name vs business name, and how they're reported on my S Corp return. My CPA loves having this because it makes the tax prep much smoother. The self-employment tax savings are definitely worth it if you're making good money, but make sure you factor in the payroll processing costs and additional tax prep fees when doing your calculations.

This is such a helpful discussion! I'm in a similar boat with my consulting LLC and have been hesitant to elect S Corp status because of the 1099 name issue. Reading through everyone's experiences gives me confidence that it's definitely doable. One question I haven't seen addressed - has anyone had issues with state taxes when doing this? I'm in California and know they have their own quirky rules sometimes. Also wondering about quarterly estimated tax payments - do you make them from your personal account for the S Corp taxes or from the business account? The reasonable salary discussion is eye-opening too. I was focused on the self-employment tax savings but hadn't fully calculated in the payroll processing costs and extra complexity. Sounds like it's still worth it for higher income levels, but definitely need to run the numbers carefully. Thanks everyone for sharing your real-world experiences - this is way more useful than the generic advice you find on most tax websites!