This is so important! My state (MA) had a $600 threshold last year while federal was still at the higher amount. I ended up having to file an amended state return and pay penalties because I didn't realize this.

This is such great advice! I wish I had started tracking everything from day one. I'm just getting into eBay selling and already feeling overwhelmed by all the record-keeping requirements. Quick question - for the internet bill portion, how do you calculate what percentage is deductible? Is it based on hours spent on eBay activities versus personal use, or is there a simpler method the IRS accepts? Also, do you recommend any specific apps or tools for tracking inventory and expenses on the go? I find myself buying items at garage sales and thrift stores and often forget to save receipts or note the details until later.

Unfortunately, once an RMD is distributed, there's no way to put it back into the IRA, even if the person has passed away. The IRS is very strict about this. The distribution becomes taxable income that needs to be reported, but as others have mentioned, it should go to the named beneficiaries of the IRA rather than to the estate.

This is really helpful advice about getting the exact processing time from the IRA custodian. I hadn't thought about the difference between when it's processed versus when it hits the bank account. That timing could be crucial for determining whether it belongs to the estate or the beneficiaries. I'm definitely going to get those certified death certificates sent over right away. How long did it take for your father's custodian to provide the inherited IRA setup forms? I'm hoping to get everything in motion before any more complications arise.

22 I use QuickBooks Self-Employed and it works great for this exact situation. They have a category specifically for "Tools & Equipment" separate from vehicle expenses. You can even take photos of receipts with your phone and it'll attach them to the transactions. At tax time, everything transfers nicely to Schedule C in the right categories.

This is really helpful clarification! I've been struggling with the same issue. One follow-up question - when you mention documenting business use percentage for dual-purpose items, do you need to track actual hours of use, or is it sufficient to just note the primary business purpose when you purchase the tool? I bought a socket set that I use 95% for my delivery truck maintenance, but occasionally might use a socket for something around the house.

For dual-purpose items like your socket set that are primarily business use (95%), you don't need to track exact hours. The IRS generally accepts reasonable estimates based on the primary purpose. Since you bought it for business vehicle maintenance and use it overwhelmingly for that purpose, you can typically deduct the full cost. However, I'd recommend keeping a simple log or note in your records stating something like "Socket set purchased for delivery truck maintenance - estimated 95% business use." This shows you considered the mixed-use issue and made a reasonable determination. The key is being able to demonstrate that business was the primary purpose and predominant use. For items where personal use is more significant (say 50/50), then you'd want to only deduct the business percentage. But for your situation with 95% business use, most tax professionals would say you're fine deducting the full amount as a business expense.

In my experience, the IRS generally doesn't assess penalties for this specific situation when you're just marking a return as final and not changing any financial information. I filed a 1065X four years after the original return just to mark it final, and there were no penalties. Make sure you clearly state in the explanation that you're not changing any financial information - just correcting the administrative oversight of not marking it as final. That seems to be the key in avoiding penalties.

This is really reassuring to hear! I'm dealing with a similar situation from 2018 and was worried about potential complications from the delay. The certified mail tip is particularly helpful - I hadn't thought about documenting the filing date that way. Did you have any trouble with the IRS accepting the partner agreement documentation, or did they process it without questioning the informal dissolution? I'm in a similar boat where we just stopped operations and divided assets according to our partnership agreement without formal state filings.

The IRS didn't question the informal dissolution at all. I think the key was being transparent about exactly what happened - I explained that while we didn't file formal dissolution paperwork with the state, the partnership had genuinely ceased all business activities and distributed assets according to our original partnership agreement. In my explanation section, I included the date operations stopped, how we handled final expenses, and how assets were divided among partners. The signed statement from all partners confirming these facts seemed to give them confidence that this was a legitimate business ending rather than just trying to avoid filing returns. The whole process was much smoother than I expected. I think they see these situations frequently and are more interested in closing out inactive entities than creating complications for people trying to clean up old records.

Can they really take your car though? The OP asked about this and I'm curious too since I'm in a similar situation.

Yes, they can technically seize your car, but it's not usually their first choice. The IRS and state tax agencies prefer easier collection methods like bank levies and wage garnishment because they're less work for them. Vehicle seizure typically happens when you have significant tax debt and have been completely unresponsive to their attempts to collect. For a $5,500 debt, if you set up a payment plan quickly, vehicle seizure is very unlikely. They want reliable monthly payments, not the hassle of auctioning off your car. The key is to contact them before things escalate further. Once you're in a payment agreement and making regular payments, they'll generally stop all collection activities. Don't let the fear of what "could" happen paralyze you from taking action. The worst-case scenarios usually only happen when people completely ignore the problem for months or years.

This is really reassuring to hear from someone who's been through it! I'm definitely going to gather those letters this weekend and make the calls on Monday. One quick question - when you called, did you need to have a specific payment amount in mind, or were they willing to work with you to figure out what you could afford? I'm trying to prepare mentally for the conversation and want to make sure I don't agree to something I can't actually stick to.