Don't forget to check if your settlement pushed you over the income threshold for any credits or deductions you normally claim! My back pay settlement last year unexpectedly put me over the income limit for child tax credits and I lost about $3,500 in credits I was counting on.

One thing that might help with your situation is to carefully review your settlement agreement to see if it breaks down the payment into different categories. Sometimes back pay settlements include components beyond just lost wages - like interest on the delayed payment, compensation for benefits you missed out on, or even damages for the wrongful termination itself. Each of these components can have different tax treatments. For example, interest portions are typically taxable as ordinary income, but certain damages might qualify for different treatment. If your settlement agreement doesn't break this down clearly, you might want to contact your union representative or the attorney who handled your case to get a detailed breakdown. Also, since you mentioned they subtracted what you earned at your temporary job in 2022, make sure that calculation is correct and that you're not being double-taxed on any income. The timing of when you received the money versus when it was "earned" can create some complex tax situations, but there may be options to help minimize the impact on your tax bracket.

Been through this exact same situation! Those codes are actually telling a pretty clear story once you know how to read them. The 846 code shows your original refund, then 971 means they sent you an audit notice, 420/421 show the examination period, and that 300 code is the big one - it means they assessed additional tax based on what they found during the audit. The fact that you're seeing the 421 "closed examination" code means the audit is officially done, which is actually good news! You should expect a bill in the mail within the next few weeks showing exactly how much you owe. Don't panic though - they usually give you payment plan options. If you want to understand exactly what each code means and get a timeline of what to expect next, I'd definitely recommend checking out taxr.ai like others mentioned. It helped me decode my transcript when I was in the same boat and really reduced my stress about the whole situation!

Ugh, I feel for you! Just went through something similar last year and those transcript codes are like trying to read hieroglyphics. From what you've described, it sounds like your audit is officially closed (that 421 code) but they found something that resulted in additional tax owed (the 300 code). The timeline you mentioned is pretty typical - they often take months to work through audits. You should definitely get a notice in the mail soon explaining exactly what you owe and giving you payment options. In the meantime, if you want to get ahead of it and understand exactly what's happening, I'd suggest checking out taxr.ai like others have mentioned. It can decode all those confusing codes and give you a clear picture of your situation before the official notice arrives. Hang in there - the hard part (the actual audit) is behind you now!

This is such a helpful thread! I'm dealing with a similar situation but have an additional wrinkle - I refinanced my rental property through a cash-out refi and used some of the proceeds to pay off credit card debt that was originally used for property repairs from the previous year. How should I handle the allocation of refinancing costs in this case? Do I need to separate the costs based on the portion that was for the original loan balance versus the cash-out portion? And does it matter that the cash-out was used to pay off debt that was originally for property-related expenses? I paid about $3,800 in total closing costs on a $180K refinance where $135K paid off the existing mortgage and $45K was cash out. My accountant wasn't sure how to advise me on this, so I'm hoping someone here has dealt with a similar situation.

I've been through this exact situation with multiple rental properties over the years. Here's what I've learned from experience and working with my CPA: **The key principle**: Refinancing costs for rental properties are generally treated as loan costs that must be amortized over the life of the loan, NOT added to the property's cost basis. This is different from acquisition costs when you first purchase the property. **Costs that are typically amortized over the loan term:** - Loan origination fees - Points paid to the lender - Mortgage broker fees - Appraisal fees (since they're for the lender's benefit) - Credit report fees **Costs that may be added to basis:** - Recording fees for the deed - Title insurance (sometimes - depends on specifics) - Legal fees for title work **Important note**: Your $4,200 in refinancing costs will likely be mostly amortizable expenses rather than basis additions. For a 30-year loan, you'd deduct about $140 per year ($4,200 ÷ 30 years) on Schedule E. I'd recommend getting a professional review of your specific closing statement, as the treatment can vary based on exactly what each fee was for. The distinction matters significantly for your taxes both now and when you eventually sell the property.

The IRS NEVER asks for power of attorney FOR THEMSELVES!! This is almost certainly a SCAM. The IRS doesn't work this way. They might ask you to get representation through Form 2848 but they don't ask for power over your affairs!!

@Diego, I understand your confusion - the terminology around tax forms can be really misleading! Based on what you're describing, this is almost certainly Form 2848 (Power of Attorney and Declaration of Representative), which is NOT you giving power to the IRS, but rather you designating someone to represent YOU when dealing with the IRS. This is actually a protective measure for taxpayers. When tax disputes get complex, the IRS often recommends (or requires) that you have professional representation - like a CPA, enrolled agent, or tax attorney. Form 2848 authorizes that professional to speak with the IRS on your behalf, access your tax records for the specific years/issues you designate, and handle correspondence about your case. You maintain full control - you choose who represents you, you can limit what they're authorized to do, and you can revoke their authority at any time with Form 2848-R. The IRS isn't asking for control over your affairs; they're asking you to get proper representation to help resolve your dispute more efficiently. Before signing anything, make sure you understand exactly which form they want and what it's for. If you're still unsure, consider calling the IRS directly or consulting with a tax professional who can review the specific documentation they sent you.

One tip I haven't seen mentioned: get a credit card that categorizes expenses for you and provides year-end summaries. I use the American Express Business Gold card for my S Corp, and their reporting makes tax time much easier. Their year-end summary breaks everything down by category, which my accountant loves.

Don't overthink this! I've had an S Corp for 3 years and here's what I do: business credit card for all business expenses, personal card for all personal stuff. I pay the business card from my business checking account. I use Wave (free) to track everything and my accountant handles the rest at tax time. Keep it simple!