Have you checked if the letter mentions any specific tax forms or income sources that might be in question? It's like trying to solve a mystery without all the clues if you don't know exactly what they're questioning. Sometimes these notices are triggered by third-party reporting that doesn't match what you filed.

I went through something similar about 6 months ago. The key thing that helped me was looking at the notice date on the letter itself versus when I received it. In my case, there was almost a 10-day gap between when the IRS says they sent it and when it actually arrived at my mailbox. During that time, I was checking my online account daily and getting increasingly worried. What really put my mind at ease was cross-referencing the specific tax year and amount mentioned in the letter with my own records. The IRS letter referenced a W-2 from an employer that I had completely forgotten about (a small freelance gig that issued a 1099 instead of what I expected). One tip: if you still have your tax software or copies of what you filed, compare line by line with what the letter is questioning. Sometimes it's as simple as a typo in a Social Security number or a form that got lost in the mail to the IRS. Don't panic yet - these discrepancies get resolved more often than not once you can actually talk to someone there.

Honestly, the quarterlies are annoying but not that hard once you set up a system. I've been selling on eBay for 10+ years and here's what works for me: 1) I set aside 30% of all my profits in a separate savings account 2) I use the IRS Direct Pay website to make payments each quarter 3) I keep it simple and just pay 25% of last year's total tax each quarter As long as you pay 100% of your previous year's tax liability (or 110% if your AGI was over $150k), you're safe from underpayment penalties. This "safe harbor" rule is your friend! Don't stress too much about the past - just start doing it correctly going forward. The penalties aren't massive if you've been paying in full by April 15 each year.

Yes, absolutely! When you make a payment through IRS Direct Pay, you'll get a confirmation number immediately after submitting the payment. I always screenshot this confirmation page and also write down the confirmation number in my records. You can also check the status of your payment on the IRS website using the "View Your Account Information" tool - just log in with your SSN and you can see all payments made to your account. I usually check this a few days after making each quarterly payment just to make sure it went through properly. Pro tip: I also set up email confirmations when I make the payments, so I get an electronic receipt sent to me automatically. Between the confirmation number, screenshot, and email receipt, I've never had any issues proving I made the payments on time.

If you're tracking all those small transit expenses, just get a dedicated credit card for your business! Makes life SO much easier come tax time. I have one card I only use for business expenses, and my accountant loves me for it. Also, pro tip: most transit systems now have apps or online accounts where you can see your trip history. I set up an account with my city's transit system, and I can download a monthly report of all my trips. I add notes to each business-related trip right away in a spreadsheet. My accountant said this is perfect documentation.

Great question about home office transportation deductions! I've been dealing with similar issues for my consulting business. One thing I'd add is about the timing of when you can start claiming these deductions - make sure your home office has been established as your principal place of business BEFORE you start claiming the transportation expenses. The IRS looks at the facts and circumstances, so if you just set up the home office recently, keep good records showing it's truly your main business location. Also, for those subway trips, I've found it helpful to take a quick photo of the client's building or entrance when I arrive - gives you visual proof of the business purpose and location. Some auditors like to see that kind of corroborating evidence beyond just logs and credit card statements. One more tip: if you do multiple client visits in one day, you can deduct transportation between all the business locations, not just from home to the first client and back. So if you go Home → Client A → Client B → Home, the entire trip is deductible as long as each stop has a business purpose.

I went through almost the exact same situation two years ago when I became a 6% owner in my consulting firm. Like you, I was worried about losing our dependent care FSA benefits, but my concerns were unfounded. The key distinction is that ownership restrictions for FSAs apply to the company where you have ownership, not to benefits obtained through a spouse's separate employer. Since your husband's FSA is through his company (where you have zero ownership), your new LLC ownership status is completely irrelevant to that benefit. One practical tip: when you transition to receiving distributions instead of W-2 wages, your household's tax situation will change significantly. You'll likely owe more in taxes due to self-employment taxes on your share of LLC profits. Consider increasing your dependent care FSA contribution to the maximum if you're not already doing so - it's one of the few tax advantages that actually becomes more valuable when you're paying higher effective tax rates as a business owner. Also, make sure your operating agreement clearly spells out how distributions will be handled and when. You'll want predictable cash flow for those quarterly estimated tax payments!

As someone who works in tax compliance, I can confirm what others have said - your LLC ownership won't affect your husband's dependent care FSA eligibility at all. The 2% owner restriction is specific to S-corporations and only applies when the owner is participating in their OWN company's cafeteria plan. However, I want to emphasize something that hasn't been mentioned enough: make sure you fully understand the tax implications of switching from W-2 to LLC distributions. Beyond the self-employment tax issue others discussed, you'll also lose certain employee benefits like unemployment insurance coverage. Also, depending on how your LLC is structured, you might have "guaranteed payments" instead of distributions if you're still working there regularly. Guaranteed payments are treated differently for tax purposes - they're subject to self-employment tax but they're also deductible to the LLC. Make sure your accountant explains the difference and how your specific arrangement will be classified. The FSA question is straightforward, but the overall tax transition deserves careful planning. Consider doing a tax projection for the full year to avoid any surprises at filing time.

When my dad passed away, we had a similar issue with the IRS claiming unreported income. In our case, it was because a retirement account distribution had been reported under the estate's EIN (Employer Identification Number) rather than my dad's SSN. The financial institution had filed the 1099-R incorrectly. Check if any financial institutions might have filed information returns using an EIN instead of your dad's social security number. This creates a mismatch in the IRS system and can trigger these kinds of notices.

I'm so sorry you're dealing with this during an already difficult time. Estate tax issues can be really overwhelming, especially when you're still grieving. One thing that might help is to look through any mail your father received in the months before and after he passed away. Sometimes financial institutions send year-end statements or tax documents to a different address, or they might have been mixed in with other mail. Even small accounts like CDs that auto-renewed or savings accounts with accumulated interest could generate 1099 forms that you weren't aware of. Also, if your dad had any employer benefits or pensions, there might have been a final distribution or rollover that generated taxable income. Sometimes these get reported to the IRS but the paperwork doesn't make it to the family right away. The good news is that the IRS is usually pretty reasonable about working with families to resolve these kinds of discrepancies, especially when there's clearly no intent to hide income. Document everything you find (or don't find) and keep copies of all your communications with them. You've got this - just take it one step at a time!