This is really helpful info! Does the First Time Penalty Abatement apply even if I've been filing regular personal taxes on time for years but this is just my first business tax return that's late?

Yes, that's exactly the situation where it typically applies! The IRS looks for a clean compliance history for the three years prior, so if you've filed your personal returns on time and paid what you owed, you'd likely qualify even though this is your first business return. The key is to file your late return first, pay as much as you can of the tax amount (even if not all), and then request the abatement. Don't request the abatement before you've filed the late return. Many people don't know about this program and end up paying penalties they could have avoided.

As a single-member LLC, you should file Schedule C with your Form 1040, not Form 1065. Form 1065 is for partnerships and multi-member LLCs. Since you're the only owner, the IRS treats your LLC as a "disregarded entity" for federal tax purposes, meaning you report all business income and expenses on Schedule C of your personal return. The exception would be if you elected to have your LLC taxed as a corporation (using Form 8832). But if you never made that election, then Schedule C is the correct form.

Oh no, I had no idea about this additional tax! Is there any way to reduce how much I'll owe in self-employment tax? I only made about $3,200 from my t-shirt designs.

The good news is that business expenses you deduct on Schedule C reduce not only your income tax but also your self-employment tax. So definitely track and deduct all legitimate business expenses. With $3,200 in income, your self-employment tax would be around $490 without any deductions. But if you have $1,000 in legitimate business expenses, your net profit would be $2,200 and your self-employment tax would drop to about $337. TurboTax will also let you deduct half of your self-employment tax on your 1040, which further reduces your income tax.

How do you even calculate what to pay each quarter? Just divide this year's tax by 4?

Do you know if there's a lifetime limit too? I remember the old version of this credit had some kind of cumulative cap.

The good news is that the Inflation Reduction Act eliminated the lifetime limit that existed with the older version of this credit. Instead, the annual limits reset each year through 2032. So in your case, you could claim up to the annual limit each year for different qualifying improvements to your home. For most improvements it's $1,200 per year, but for heat pumps, heat pump water heaters, and biomass stoves/boilers, you can claim up to $2,000 annually.

We replaced our old HVAC with a heat pump last year and our electricity bill dropped by about $70/month. At that rate it'll take us about 8 years to break even considering the tax credit. Not amazing but not terrible either, plus our house is way more comfortable now.

This is actually really good advice. I was in a similar position with a business vehicle and decided to keep it for an extra year. By that time, I had paid down the loan enough that the sale covered the remaining balance. Plus I was in a lower tax bracket that year, so the depreciation recapture hit me less hard.

We tried that first but ran into issues with the identity verification. Apparently since he's never filed before, there's not enough tax history for the automated system to verify him. It kept rejecting the account creation. So frustrating!

That's common with the ID verification system if you don't have a filing history. Another option is to have him go to a local IRS Taxpayer Assistance Center in person. They can provide transcripts on the spot, and their identity verification process is different than the online system. He'll need to call 844-545-5640 to make an appointment first. Just make sure he brings two forms of ID. The in-person verification might bypass the issues you're having online.

Totally agree! I used to work at one of those places (won't name names) and we were trained to upsell unnecessary services. For a prior year return, we'd charge double or triple the normal fee even though it's the exact same work. The "professional" preparing your taxes often has minimal training too - like a 2-week course.