I'm dealing with a similar situation - K-1 with losses in 4 states and getting overwhelmed by all the conflicting advice from different tax software. Reading through these responses, it seems like the key is really understanding each state's specific filing requirements rather than just assuming you need to file everywhere. The suggestion about checking minimum filing thresholds makes a lot of sense. I hadn't considered that some states might have income/loss thresholds below which you don't need to file as a nonresident. That could potentially save me from filing 2-3 unnecessary returns. One thing I'm curious about - for those who've taken the approach of only filing in states with "significant" activity, have you ever received any notices or inquiries from the states where you didn't file? I'm trying to weigh the cost savings against the potential audit risk, even if it's small.

I've been dealing with multi-state K-1 situations for several years now, and honestly, the approach has evolved based on experience. In my first year, I filed everywhere out of fear - spent over $400 in state filing fees for returns that resulted in zero tax liability. What I've learned is that you really need to look at three factors: 1) The specific state's filing requirements and thresholds, 2) The materiality of the amounts involved, and 3) Your long-term relationship with the partnership. For ongoing partnerships where you expect future activity, establishing a filing history can be worth it even with losses. But for one-off investments or partnerships you're exiting, the cost-benefit analysis often favors selective filing based on state requirements. One practical tip: Many states publish their nonresident filing requirements clearly on their websites. Before paying for additional services or spending hours on hold, check the state's own guidance first. I've found that about 60% of my multi-state situations become much clearer just from reading the actual state requirements rather than relying on generic tax software warnings. The key is making an informed decision rather than just defaulting to "file everywhere" or "file nowhere.

Isn't this covered under Section 195 for startup expenditures? That's what I've used in the past when filling out the 4562 for similar costs.

Based on the discussion here, it sounds like Section 163 is the right approach for your loan acquisition costs. I went through something similar last year with our partnership's commercial property financing. One thing to double-check though - make sure you're distinguishing between different types of loan costs. Some costs like appraisal fees or environmental assessments might need to be capitalized into the property basis rather than amortized separately. The true financing costs (origination fees, points, etc.) are what go on the 4562 under Section 163. Also, just as a heads up, if any of those loan costs were paid by the seller on your behalf, those typically get added to your property basis instead of being amortized as financing costs. The IRS can be pretty specific about how these different costs are treated, so it's worth reviewing exactly what's included in your total. Good luck with the filing! The 4562 can be tricky but once you get the right code section it's much more straightforward.

Your situation is actually quite promising for an OIC approval! As someone who recently went through this process with retirement accounts involved, I want to reassure you that having a Roth IRA doesn't automatically disqualify you from getting an offer accepted. The key thing to understand is that the IRS doesn't value your retirement accounts at their full balance when calculating your reasonable collection potential. They use what's called the "quick sale value" which factors in early withdrawal penalties, taxes, and the fact that depleting retirement savings creates long-term financial hardship. For your $16,800 Roth IRA established in 2013, the IRS will consider that you can withdraw contributions penalty-free (since it's been over 5 years), but any earnings would face the 10% early withdrawal penalty plus taxes. This significantly reduces how they value the account - probably closer to $12,000-13,000 for OIC calculation purposes. With your debt dropping to around $6,300 after your refund applies, you're actually in a strong position. The relatively small debt amount combined with the penalty considerations on your retirement account should make a reasonable offer very viable. I'd suggest offering something in the $8,500-9,500 range that shows you're willing to use some retirement funds while preserving most of your future financial security. Make sure to emphasize in your application narrative that this is your only retirement savings and that complete liquidation would create genuine long-term hardship. Don't let that pre-qualifier tool discourage you - it's too basic to account for the nuances of retirement account valuations that a full OIC application allows you to present.

I've been following this discussion closely as someone who works in tax resolution, and I want to add some important context about OIC applications with retirement assets. The IRS has specific guidelines for evaluating retirement accounts in Form 656 applications. They use Publication 5.8.1.5 which outlines how to calculate the "net equity" in retirement assets. For established Roth IRAs like yours, they'll consider the penalty-free withdrawal amount for contributions, but apply quick sale value reductions for any earnings that would face early withdrawal penalties. One crucial point I haven't seen mentioned - the IRS also evaluates your "future income potential" over 12-24 months when determining reasonable collection potential. If you're currently earning income that could service the debt through an installment agreement, this factors into whether they'll accept a lower OIC amount. Given your situation - $6,300 remaining debt after refund, $16,800 Roth IRA established 2013 - I'd recommend calculating your total contributions to date first. If you've contributed, say, $12,000 over the years, the IRS might value your quick sale equity at around $12,000 (penalty-free contributions) plus perhaps 70-80% of the $4,800 in earnings (accounting for penalties/taxes). This puts you in a much stronger position than the pre-qualifier indicated. An offer in the $9,000-10,000 range addressing both your asset equity and future income capacity could very well be accepted, especially with strong hardship documentation about preserving your only retirement savings.

Has anyone considered that maybe an LLC with S-Corp election could help with the self-employment tax issue? If the Airbnb activity is definitely a business and not just rental income, you could potentially save on SE tax by taking a reasonable salary and the rest as distributions.

This is such a common confusion! I went through the same thing when I started hosting. The key thing to understand is that the IRS uses a "facts and circumstances" test to determine if your Airbnb income is subject to self-employment tax. From what you've described about your sister's situation, she's likely crossing into self-employment territory. The combination of personal cleaning, welcome baskets, providing utilities, and active management suggests she's providing "substantial services" beyond just renting space. Here's what I learned matters most: if the average guest stay is 7 days or less AND you're providing services primarily for the guest's convenience (rather than just maintaining the property), it's usually considered a business activity subject to SE tax. The welcome baskets might seem small, but they're actually a red flag to the IRS because they show you're going beyond basic property rental into hospitality services. Combined with her doing all the cleaning personally, it really looks like active business income rather than passive rental income. My advice? Have your sister track everything carefully - guest stay lengths, time spent on management activities, and all the services she provides. This documentation will be crucial whether she ends up owing SE tax or if she ever gets audited.

Has anyone been audited for this stuff? I've been running estate sales for 5 years and never bothered with any 1099s either way. I just report all my commission income on Schedule C.

I just want to echo what others have said here - you're absolutely on the right track by questioning this! I made the same mistake in my first year running estate sales and actually did issue 1099-NECs to several clients before my accountant corrected me. The key thing to remember is that 1099-NECs are for when YOU pay someone else for services they provided to YOUR business. In estate sales, it's the opposite - your clients are paying you for the service of conducting their sale and you're taking your commission from the proceeds. Think of it like this: if you hire a plumber to fix your sink, you don't expect the plumber to send you a 1099 for the money you paid them. Same principle applies here. Just keep detailed records of your gross sales, your commission percentage, and what you paid to each client. That's all you need for proper tax reporting on your Schedule C. The IRS cares that you're reporting your income accurately, not that you're creating unnecessary paperwork.