6 Quick question - has anyone actually dealt with the IRS directly on this kind of issue? I'm in a similar situation (employer didn't withhold for 1 year claiming I was exempt), and I'm wondering if I should just bypass my former employer entirely and go straight to the IRS?

This is a frustrating situation that unfortunately many employees face. Your employer made a significant error, and you're absolutely right to question their attempt to make you responsible for their penalties. Here's what you need to know: You are only legally responsible for YOUR portion of FICA taxes (7.65% of your wages for those 3 years). You are NOT responsible for: - The employer's matching portion (another 7.65%) - Any penalties or interest charges - Their processing fees The employer is required by law to withhold and remit FICA taxes, and when they fail to do so, they're responsible for all penalties and interest that result from their error. My recommendation is to document everything in writing with your former employer. Give them a reasonable deadline (like 30 days) to provide you with a corrected statement showing only your portion of the taxes owed. If they refuse, you can file Form 8919 with your next tax return to pay your portion directly to the IRS, and let the IRS handle collecting the employer's portion and penalties. Don't let them intimidate you into paying for their mistake. The law is clear on this issue.

One more important consideration that hasn't been mentioned - make sure you and your brother-in-law are on the same page about tax elections before you finalize everything. When you convert to a partnership, you'll have options for how profits and losses are allocated that go beyond just your ownership percentages. For example, you might want to allocate more of the depreciation deductions to the partner in a higher tax bracket, or structure guaranteed payments for the managing partner. Also, consider whether you want to make a Section 754 election, which can be beneficial for basis adjustments when partners join or leave. It's easier to make this election early rather than trying to add it later. I'd strongly recommend having a tax professional review your partnership agreement before you sign it. The 60/40 split sounds straightforward, but there are a lot of nuances in partnership taxation that can bite you if not handled properly from the start.

This thread has been incredibly helpful! I'm going through a similar conversion process right now and wanted to add a few things I've learned from my attorney and CPA that might help others: 1. **Timing matters for tax purposes** - If you're converting mid-year, you'll need to decide whether to make the partnership election effective from the beginning of the tax year or from the date the new member joins. This affects how you'll file your taxes for that year. 2. **Capital account tracking** - Make sure your operating agreement includes proper capital account provisions. The IRS requires partnerships to maintain capital accounts for each partner, and these need to follow specific rules to avoid complications. 3. **State franchise taxes** - Some states charge different franchise taxes for partnerships vs. single-member LLCs. In my state (Texas), multi-member LLCs are subject to franchise tax while single-member LLCs are not. 4. **Employment tax considerations** - If you were previously treating yourself as a sole proprietor for self-employment tax purposes, this changes significantly when you become a partnership. Partners generally aren't employees, so you'll still pay self-employment tax on your distributive share, but the mechanics are different. The conversion process has definitely been more complex than I initially thought, but having the right professional guidance has made it much smoother. Thanks everyone for sharing your experiences!

I went through this exact same situation last year with my husband's refund. Code 898 means the Treasury Offset Program intercepted the entire refund for a government debt. The confusing part about the dates (refund issued 02-26 but offset 03-10) is normal - the IRS systems don't always sync up perfectly, so it shows as "issued" but gets caught before actually hitting your bank account. Definitely call the TOP hotline at 800-304-3107 ASAP to find out which agency claimed the debt. In our case, it was an old student loan that had gone into default without us realizing it. The agency that took the money should have sent advance notice, but those letters often get lost or look like junk mail. Once you know which agency has the money, you can contact them directly to dispute it if needed or work out a payment plan for any remaining balance. Don't wait too long though - many agencies have strict deadlines for appeals. Good luck!

I'm so sorry you're dealing with this - it's incredibly stressful when your refund just disappears! Code 898 definitely means your boyfriend's entire refund was taken through the Treasury Offset Program for a government debt. The good news is that calling 800-304-3107 (the TOP hotline) will tell you exactly which agency took the money and why. One thing to keep in mind is that even if he thinks all his debts are current, sometimes things fall through the cracks in government systems. I've seen cases where people were making payments on student loans but the servicer didn't properly credit them, or where old state tax debts resurface years later. The timeline confusion on the transcript is normal - the IRS computer systems are notoriously outdated and don't always communicate in real time. What likely happened is the refund was initially processed (hence the 846 code on 02-26) but before it could be deposited, the TOP system caught the debt and intercepted it (the 898 code on 03-10). When you call, be prepared for a long wait time, but they should be able to tell you exactly which agency claimed the debt and provide contact information. From there, you can work directly with that agency to understand the debt and explore your options. Don't give up hope - sometimes these situations can be resolved, especially if there was an error in the system!

This thread has been incredibly helpful! I'm dealing with a similar EIC discrepancy, but mine involves rental income alongside my Schedule C business. The IRS is claiming my EIC should be $800 less than what I calculated. Reading through everyone's experiences, it sounds like the common thread is that tax software doesn't always handle the nuanced EIC calculations correctly when you have multiple income sources or business losses. The distinction between different types of self-employment income (S-Corp vs Schedule C) and how losses are applied seems to be where most of the confusion happens. Has anyone found a good resource that breaks down exactly how the IRS calculates EIC when you have both business income and losses? The IRS publications are so dense, and I'm trying to figure out if I should fight this or if they're actually right.

This is such a complex situation, and I feel for you dealing with this EIC discrepancy! From reading through all the responses here, it seems like the core issue might be how your S-Corp loss is being treated differently by the IRS versus your tax software for EIC calculation purposes. One thing that stands out from your situation is that you have both an S-Corp loss (-$8,254) and your husband's Schedule C profit ($42,743). The IRS has specific rules about how business losses from different entity types affect the EIC calculation, and it sounds like your software may not have applied these correctly. Here's what I'd recommend based on what others have shared: 1. Get your wage and income transcript from the IRS to see exactly what they have on file 2. Look specifically at IRS Publication 596, Worksheet B for self-employment EIC calculations 3. Verify that your software correctly distinguished between your S-Corp activities and your husband's sole proprietorship for EIC purposes The $1,183 difference ($3,451 vs $2,268) is significant enough that it's worth fighting if you're correct, but based on the experiences shared here, there's a good chance the IRS calculation might actually be right due to how S-Corp losses are treated differently than Schedule C losses for EIC purposes. Have you considered requesting a detailed explanation from the IRS about their specific calculation method for your situation?

I completely feel your pain on this! Just went through the exact same situation in February and it was such a stressful process. Here's what I wish someone had told me from the start: DEFINITELY call the number on your letter before you schedule any appointment! Even though your letter says to schedule an appointment, you might still qualify for ID.me online verification. I wasted two weeks stressing about coordinating an in-person visit before I found out I could do it online. Call right at 7 AM when they open - that's your best shot at getting through. Have your SSN, the letter, and a copy of your return ready. Ask specifically: "Am I eligible for online identity verification through ID.me?" If you do qualify for online verification: - Both you and your husband will need to complete it separately since you filed jointly - You can do it on your own devices from home - Takes about 15-20 minutes each - SO much better than taking time off work! If you must go in person, unfortunately yes - both spouses are required for joint returns. The IRS is super strict about this and won't make exceptions. The good news is once you complete verification (online or in-person), your refund usually processes within 2-3 weeks. I know it's incredibly frustrating, but you're almost through the worst part! The online option saved my sanity - hopefully it's available for you too! 🤞

I went through this EXACT situation just last month and I totally understand your frustration! Here's what ended up working for me: First - before you resign yourself to that dreaded in-person appointment, definitely call the number on your letter and ask specifically about ID.me online verification eligibility. I made the mistake of assuming I had to go in person just because that's what the letter emphasized, but it turns out I qualified for online verification! The key is calling RIGHT when they open at 7 AM - I had to redial about 20 times but finally got through. Have your SSN, the verification letter, and your tax return handy when you call. If you do qualify for ID.me (fingers crossed!): - Both you and your husband will need to complete it since you filed jointly - You can do it separately on your own devices from home - Takes about 15-20 minutes each - Uses facial recognition and document scanning - pretty straightforward If online isn't an option, then unfortunately yes - both spouses absolutely must attend the in-person appointment for joint returns. The IRS is very strict about this requirement and won't make exceptions. For what it's worth, once you complete the verification (whether online or in-person), your refund typically processes within 2-3 weeks. I know this whole process is incredibly frustrating, but you're so close to being done with it! The ID.me option saved me hours of hassle - really hoping it's available for you too! 🤞