Great question! I went through this exact same situation when I started renting out a room in my condo. Your 12% calculation based on square footage is the right approach - that's the standard method the IRS expects. One thing I learned the hard way: make sure you're using the correct square footage. Only count livable space, not garages, unfinished basements, or storage areas. Also, if your tenant has access to common areas like the kitchen or living room, some tax professionals suggest you might be able to claim a slightly higher percentage, but definitely document your reasoning. For the utilities you split with your tenant - you'll want to be careful here. If they pay you directly for half the electric bill, don't include that as rental income. Just report the $12,500 rent and deduct your portion of the utilities. Since you mentioned the house is new, remember that you can't depreciate the land value, only the structure. Your property tax assessment should break this down, or you can use local assessment ratios (typically 80% structure, 20% land, but varies by location). One last tip: consider setting up a separate checking account for rental income and expenses. Makes tracking everything so much easier come tax time!

I'm dealing with a very similar situation - just started renting out a bedroom in my house this year! One thing that hasn't been mentioned yet is keeping detailed records of your tenant screening and advertising costs. Those are 100% deductible business expenses. Also, for the depreciation calculation that's confusing you - you'll need your home's purchase price minus the land value. If your closing documents don't break this down clearly, you can often find the land-to-building ratio on your county assessor's website or property tax records. Quick tip: Since you mentioned splitting electricity with your tenant, make sure you're tracking this consistently. I keep a simple spreadsheet each month showing the total bill, what my tenant pays me, and what I actually pay out of pocket. This makes the tax calculations much cleaner. The 12% calculation you're using sounds right for deductions, but remember that percentage will be crucial for depreciation too - you can only depreciate the rental portion of the home's value over 27.5 years. Good luck with your first year of rental income taxes!

If you want to check the status without waiting, you can also log into your IRS online account at irs.gov - it'll show any credits or pending refunds. Way faster than calling them!

Had the same thing happen to me last year! The letter can look a bit confusing at first but it's actually good news. Mine was from overpaying estimated taxes. Just make sure the amount matches what you think you overpaid, and if everything looks right, sit tight - the refund should come automatically. No action needed on your part unless there's an error.

Based on what you've described, the majority of your daughter's $18,500 settlement should not be taxable since it was for medical expenses, pain and suffering from physical injuries sustained in the car accident. However, I noticed you mentioned there might be a portion labeled as "interest" - that specific part would need to be reported as taxable income. The insurance company typically won't send a 1099 for personal injury settlements, but your daughter should definitely keep the settlement agreement documentation that breaks down what each portion of the payment was for. This will be crucial if the IRS ever has questions. Since the settlement is relatively straightforward (mostly medical/injury compensation with possibly a small taxable interest component), you might not need to hire a tax professional. However, if you want peace of mind or if the settlement breakdown is unclear, a quick consultation could be worth it. Some of the tools mentioned in other comments here might also help you analyze the settlement documents to determine exactly which portions, if any, need to be reported. The key is making sure you have clear documentation of what each dollar was compensating for - that's what determines the tax treatment.

I've been through a similar situation with my son after his motorcycle accident settlement last year. The most important thing is getting clear documentation of what each portion of the settlement covers - this saved us so much confusion later. In our case, the settlement breakdown was: - Medical expenses and rehabilitation: $12,000 (not taxable) - Pain and suffering for physical injuries: $8,500 (not taxable) - Property damage (motorcycle): $3,200 (not taxable) - Interest on delayed payment: $800 (taxable) That $800 interest portion was the only part we had to report as income. The insurance company didn't send us any tax forms, but we kept all the settlement paperwork just in case. One thing I'd recommend is asking the insurance company or your daughter's attorney (if she had one) to provide a clear written breakdown of what each dollar amount represents. This makes tax time much easier and gives you solid documentation if the IRS ever has questions. Most personal injury settlements are pretty straightforward tax-wise, but having that paper trail is invaluable.

This is a complex situation that definitely requires careful handling. One important point to add to the excellent advice already given - make sure you get proper documentation from your LTD carrier showing the exact breakdown of what you're repaying and for which time periods. When dealing with the claim of right repayment, the IRS will want to see clear records showing that this was income you previously reported and paid taxes on. Keep all correspondence with the LTD company, including their demand letter and any settlement agreements. Also, since you mentioned you had substantial capital gains this year, be aware that the timing of your repayment could affect your overall tax bracket and potentially impact other aspects of your return (like net investment income tax or additional Medicare tax). The claim of right credit calculation takes this into account, but it's another reason why consulting with a tax professional might be worth the cost given the amounts involved. One more thing - if you're making the $76k repayment in installments rather than a lump sum, you'll need to determine how to handle the tax treatment. Generally, you'd claim the credit in the year you actually make the payments, not when you agree to the repayment terms.

Just wanted to add another consideration that might help with your situation - timing your repayment strategically within the tax year. Since you mentioned having capital gains and other income this year, you might want to coordinate the timing of your LTD repayment with other tax planning moves. For example, if you have control over when you realize additional capital gains or take other distributions, you could potentially time the repayment to maximize the benefit of the Section 1341 credit. The credit is calculated based on your prior years' tax situation, but how much it helps your current year depends on your current tax bracket. Also, don't forget to consider state tax implications. Some states don't recognize the federal claim of right credit, so you might need to handle the repayment differently for state tax purposes. This could affect whether it makes sense to itemize deductions versus taking the credit route. Given the complexity and the substantial amounts involved ($76k repayment plus $11k in taxes already paid), I'd really recommend getting a consultation with a tax professional who has experience with disability insurance repayments. The potential tax savings from getting this right could easily justify the cost of professional advice.

As someone who went through this exact situation last year, I can't stress enough how important it is to do this the right way. I was tempted by the "quick fix" options too, but after researching the penalties and talking to other preparers, I realized it wasn't worth the risk. Here's what I did and it worked out perfectly: 1) Filed my PTIN application immediately (got it same day) 2) Started my EFIN application right away with all documents triple-checked 3) Found a local CPA firm that let me work under their EFIN for a 60/40 split while mine processed 4) Got my own EFIN approved 6 weeks later, just in time for the busy season The temporary arrangement actually worked out great - I learned a lot about their systems and processes, built relationships with clients, and when I transitioned to my own practice, several clients followed me. The CPA firm was happy because they got help during busy season without having to hire permanent staff. Don't risk your future over a few weeks of waiting. There are legitimate ways to get started while your credentials process!

I want to echo what others have said about avoiding the rental route - it's absolutely not worth the risk. As someone who works in tax compliance, I've seen the IRS come down hard on these arrangements, and the penalties can be career-ending. However, I do want to offer some hope for your timeline. The IRS has actually streamlined their EFIN processing significantly for the 2025 season. If you submit a complete, error-free application now, you're looking at closer to 4-5 weeks rather than the traditional 6-8 weeks. The key is making sure everything is perfect the first time - any errors or missing documents will reset your timeline. For the PTIN, definitely apply today. It's straightforward and you'll have it immediately. In the meantime, consider reaching out to local tax preparation offices, enrolled agents, or CPAs who might need seasonal help. Many are actually looking for qualified preparers right now and would be open to a legitimate subcontractor arrangement. This gives you income, experience, and a legal way to prepare returns while your own credentials process. The temporary partnership route that others mentioned is really your best bet. It's completely legal, gives you practical experience, and positions you well for when your own EFIN comes through. Don't let impatience derail what could be a successful long-term career!