Just wondering - does anybody know if the IRS has some kind of whistleblower program? I know someone who brags about how they only report like half their cash business income on taxes and it's really frustrating watching them buy expensive stuff while complaining about "being broke" at tax time.

This is a really interesting discussion! As someone who's been researching tax compliance for a small business I'm considering, I've learned that the IRS also uses data analytics to identify patterns across similar businesses in the same geographic area. They can compare your reported income to other cash businesses of similar size in your zip code or city. If you're significantly below the average, it raises flags for potential audit. They also track things like business license renewals, health department inspections, and even parking meter data in some areas to estimate foot traffic and correlate it with reported sales. What's really eye-opening from this thread is how many different angles the IRS can approach this from - it's not just about the money trail, but about creating a complete picture of business activity from multiple data sources.

When calling the agency on the 1099-G, ask them specifically about the "payer" section. Sometimes states issue these for things besides unemployment - like lottery winnings, state incentives, or special programs. My mom got one for a state energy rebate program she participated in and was freaking out thinking it was fraud.

Just to add another perspective - before jumping to identity theft conclusions, double-check if you received any state-level benefits or refunds in 2023 that you might have forgotten about. I got a 1099-G last year that turned out to be for a property tax rebate my state issued to homeowners. The key is looking at Box 1 (which shows the amount) and Box 2 (which shows any federal taxes withheld). If there's an amount in Box 1 but you're certain you never received that money, then yes, it's likely fraudulent unemployment benefits filed in your name. Also worth noting - if this IS unemployment fraud, don't wait to address it. The fraudsters often file tax returns quickly to claim refunds on the stolen benefits, which can complicate your own tax filing if the IRS already has a return on file for you.

Great question about cost segregation for smaller properties! I've actually done cost seg studies on properties ranging from $200k to $800k. The key is finding the right firm - some specialize in smaller properties and charge accordingly. For properties under $400k, I'd recommend getting quotes from multiple firms. Some charge a flat fee based on property size rather than a percentage of savings. I paid $2,800 for a $320k cabin and it identified about $68k in accelerated depreciation, saving me roughly $20k in taxes. The sweet spot seems to be properties with significant interior improvements, special electrical/plumbing systems, or unique features like commercial-grade appliances. Even smaller STRs often have these components that qualify for 5-7 year depreciation instead of 27.5 years. Don't let your tax preparer discourage you without getting an actual quote. Many firms will do a preliminary analysis for free to estimate potential savings before you commit to the full study.

This is an excellent discussion! I wanted to add a few important points from my experience with STR depreciation strategies: First, make sure you're tracking your properties correctly as business assets versus personal use. The IRS has specific rules about STR properties - if you use them personally for more than 14 days or 10% of rental days (whichever is greater), it affects your depreciation eligibility. Second, don't overlook Section 199A deductions in combination with bonus depreciation. Many STR operators qualify for the 20% pass-through deduction, and the increased depreciation from cost segregation can actually help you meet the income thresholds more easily. Finally, consider the timing carefully. With bonus depreciation phasing out, there's real value in getting those older properties amended sooner rather than later. I've seen people wait too long and miss the statute of limitations for certain years. One last tip - keep detailed records of when each property was "ready and available for rent" versus when you got your first booking. The IRS considers the "placed in service" date to be when it was ready for rental activity, not necessarily when you had your first guest. This can sometimes push you into a more favorable bonus depreciation year.

As someone new to this community and dealing with IRS verification for the first time, I can't thank everyone enough for sharing such detailed experiences! Reading through all these responses has been incredibly educational and reassuring. I'm currently waiting for my verification letter to arrive (I can see the notice in my IRS online account), and now I know exactly what to look for - the ABC12345678901 format, checking margins and corners, using bright lighting or phone flashlight, and even taking photos to zoom in for faint printing. The tip about calling at 7 AM for shorter wait times is pure gold! I also really appreciate everyone emphasizing the importance of verifying the letter's authenticity by cross-referencing phone numbers with IRS.gov - with so many scams out there, that's crucial advice. One question for the group: for those who completed verification successfully, did you receive any confirmation (email, letter, or online account update) that the verification was complete, or did you just have to wait and check your transcript for the hold codes to disappear? Thanks again to this amazing community for making such a stressful process feel much more manageable!

As a newcomer to this community and someone who's never dealt with IRS identity verification before, I can't express how helpful this entire thread has been! Reading everyone's detailed experiences has transformed what felt like an overwhelming and scary process into something much more manageable. I'm particularly grateful for the specific tips about locating the 14-digit control number - the ABC12345678901 format description, checking margins and corners with bright lighting, using phone cameras to zoom in for faint printing, and even looking for vertical text along the edges. The advice about calling at 7 AM for shorter wait times is incredibly practical too. What really stands out to me is how this community emphasizes both practical solutions AND security awareness. The reminders to verify letter authenticity by cross-referencing phone numbers with IRS.gov are so important with all the scams targeting taxpayers these days. For anyone else new to this process like me: this thread shows that while identity verification can be stressful, it's definitely manageable when you know what to look for and have the right information prepared. The fact that so many people have successfully navigated this gives me confidence that we can too. Thank you to everyone who took the time to share their experiences - this kind of community support makes all the difference when dealing with tax issues!

Make sure you have proper documentation of how the disaster affected you financially! I claimed a qualified disaster distribution last year and got audited. The IRS wanted proof I actually experienced economic loss from the disaster. Had to show them bank statements, repair bills, and evidence I lived in the affected area. Just checking the box isn't enough - keep records showing how the disaster impacted your finances and why you needed to take the distribution.

@Tyrone Hill - Based on your description, whether you qualify for a qualified disaster distribution depends on whether your financial hardships in 2023 were directly caused by a federally declared disaster. Simply having financial difficulties unfortunately doesn't qualify you for disaster relief - there needs to be a connection to an actual declared disaster event. Check your 1099-R Box 7 first. If it shows code "1" (early distribution) rather than "2" (exception applies), your plan administrator didn't code it as a disaster distribution. You'd need to have been affected by one of the 2023 federally declared disasters (like the California atmospheric rivers, Florida hurricanes, or Midwest flooding) to potentially claim this. If you were impacted by a declared disaster, you can still file Form 8915-F even with the wrong 1099-R coding. But without a disaster connection, you'll likely face the 10% early withdrawal penalty plus regular income tax on the full $18,500. There may be other hardship exceptions available though - medical expenses, higher education costs, or first-time home purchase can sometimes waive the penalty even if disaster relief doesn't apply.