Does anyone know if tax software like TurboTax handles Section 1245 property sales correctly? I'm in a similar situation as the original poster but with about $31,000 of equipment I depreciated around $16,000 and need to sell for maybe $9,000-ish.

Just to add another perspective here - I went through this exact scenario last year with some manufacturing equipment. The key thing that helped me understand it was thinking about depreciation recapture as only applying to the "gain" portion of a sale. In your case, you have an adjusted basis of $13,500 ($27,000 original cost minus $13,500 depreciation taken). Since you're selling for $6,700, which is below your adjusted basis, there's literally no gain to recapture. The $6,800 difference ($13,500 - $6,700) becomes an ordinary business loss that you can deduct. Your buddy might be thinking of situations where people sell equipment for more than the depreciated value but less than the original purchase price. That's when you get into partial recapture scenarios. But in a straight loss situation like yours, no recapture applies. Make sure you keep all your depreciation schedules and purchase records handy when you file - you'll need them to properly complete Form 4797 for the asset sale.

This whole situation really illustrates how complex and sometimes unfair the tax system can be for seniors making life changes. Your aunt's case is a textbook example of how the MFS rules create a "tax trap" for Social Security recipients. The 85% taxation she's experiencing is correct under current law, but it's worth noting that this isn't necessarily the percentage of her Social Security that will actually be taxed - it's the maximum percentage that becomes "taxable income" subject to her regular tax rates. The actual tax impact depends on her overall tax bracket. One thing that hasn't been mentioned yet is that your aunt might want to consider whether she has any other deductions or credits that could help offset this increased taxable income. Things like medical expenses, charitable donations, or other itemized deductions might provide some relief, though they'd need to exceed the standard deduction to be beneficial. For immediate help with her current situation, she might also want to check if she's having enough tax withheld from her Social Security payments or if she needs to make estimated tax payments to avoid underpayment penalties next year. The IRS allows you to request voluntary withholding from Social Security benefits using Form W-4V. Going forward, this is definitely a situation where professional tax planning could save them significant money. The difference between MFS and MFJ could be substantial enough to justify the cost of professional help in navigating both spouses' tax situations together.

This thread has been incredibly enlightening about Social Security taxation rules! Your aunt's situation is unfortunately a perfect storm of timing and tax code complexity. What really stands out to me is how those 21 days in December essentially created a year-long tax penalty. The MFS rules for Social Security recipients who lived with their spouse are genuinely harsh - that $0 threshold means there's basically no protection from the 85% taxation rate. I've been following all the suggestions here, and it seems like the consensus is clear: for 2024, your aunt and her husband really need to sit down together and run the numbers on joint vs. separate filing. Given that he's younger and not collecting Social Security yet, their combined income might actually keep them under the thresholds where only 50% of her Social Security would be taxable instead of 85%. One thing I'd add is that if her husband continues to be uncooperative about joint filing, your aunt might want to document this for future reference. If there are ongoing disagreements about tax strategy that are costing her significant money, this could become relevant for other financial planning decisions down the road. It's really unfortunate that people have to become tax experts just to navigate major life changes like remarriage, especially when they're on fixed incomes. The tax code shouldn't penalize seniors for finding companionship later in life, but unfortunately that's the reality of how these rules work.

Quick question - my brother is in a similar situation. Does anyone know if there's a statute of limitations on filing for an ITIN? He's been in the US for 4 years but never got one. Can he still apply now or is it too late?

This is exactly the kind of predatory practice that unfortunately targets people who don't speak English well. Your friend was likely taken advantage of by a tax preparer who filed an unnecessary return to generate fees. Since your friend's income is below the filing threshold and he just needed an ITIN (probably for banking), he most likely qualified for Exception 1(d) and shouldn't have had to file a tax return at all. The $839 "owed" is probably from a return that was filed incorrectly or unnecessarily. I'd strongly recommend your friend contact the Taxpayer Advocate Service at 1-877-777-4778 - they have multilingual support and can help sort this out for free. They can review what was filed and help determine if the tax bill is legitimate or if the return should be amended/canceled. Also, consider filing a complaint against the community center using Form 14157 if they deliberately filed an unnecessary return to generate fees. This kind of exploitation of immigrant communities needs to be reported. The good news is this situation can likely be resolved - your friend probably doesn't owe anything and can still get his ITIN through the proper exception process.

I think we're missing something obvious here. Maybe she just doesn't want to pay the fees or go through the hassle of the application? A friend of mine who's a tax preparer told me getting an EFIN requires fingerprinting, an in-person interview sometimes, and a bunch of documentation. Sounds like this lady might just be lazy and cutting corners rather than being unable to qualify.

This whole situation raises red flags about the quality and ethics of this tax preparer's practice. As someone who's dealt with tax compliance issues before, I can tell you that the IRS takes EFIN violations very seriously - it's not just a technical violation, it's a breach of the entire electronic filing system's integrity. What concerns me most is that clients may not even realize their returns are being filed under fraudulent credentials. When tax season gets busy, people often don't pay close attention to the technical details on their forms. But if the IRS discovers this arrangement and investigates, those clients could face delays in processing their refunds, additional correspondence, or even audits through no fault of their own. The fact that she's been operating this way for 3 years suggests this isn't an oversight or temporary arrangement - it's a deliberate choice to circumvent IRS requirements. Whether it's because she can't qualify for her own EFIN or just doesn't want to go through the proper process, either scenario should make potential clients think twice about trusting her with their financial information. I'd strongly recommend anyone considering using her services to verify that their preparer has their own valid EFIN before handing over their tax documents.

Great advice from everyone here! I'd also suggest asking the tax preparer about their professional liability insurance. Legitimate preparers typically carry errors and omissions (E&O) insurance to protect both themselves and their clients in case of mistakes. You can ask to see their insurance certificate or at least ask what company provides their coverage. If they don't have professional liability insurance or seem confused by the question, that's another red flag to consider. Also, be wary of preparers who guarantee huge refunds before even looking at your documents, ask you to sign blank forms, or want to deposit your refund into their own account. These are classic signs of fraudulent operations that having a valid PTIN won't protect you from. The strip mall location and lower prices really don't mean much - some of the best preparers I know operate small independent practices with very reasonable rates!

One more verification step I'd recommend - check with your state's licensing board if your state requires tax preparers to be licensed or registered at the state level. Some states have additional requirements beyond just the federal PTIN. For example, California requires tax preparers to register with the California Tax Education Council (CTEC), and Oregon has its own licensing system. You can usually search these state databases online to verify if someone is in good standing. Also, trust your gut feeling about the interaction. Legitimate preparers should be patient with your questions about credentials and verification. If someone gets defensive or pushy when you ask about their PTIN, EFIN, insurance, or credentials, that's a red flag regardless of what their paperwork shows. The fact that you're being this thorough about vetting them shows you're being smart about protecting your personal information. Better to spend time upfront verifying than dealing with identity theft or filing errors later!