Thank you for mentioning this. If I end up owing the full amount, a payment plan might be my only option. Do you know if they run a credit check or anything for these payment plans?

They don't run a credit check for standard payment plans. The IRS offers short-term plans (paying within 180 days) with no setup fee, or long-term plans with a small setup fee. For amounts under $10,000, it's usually automatic approval as long as you've filed all required tax returns. The current interest rate is around 7% annually, plus a small failure-to-pay penalty of 0.25% per month while you're on the plan. Still way better than ignoring it and getting hit with the full 0.5% monthly penalty plus potential collection actions.

This is really important advice. My parents almost fell for a scam last year that looked EXACTLY like a real IRS letter. The only thing that tipped me off was they wanted payment through Zelle.

The letter does have CP2000 in the corner and it doesn't ask for any weird payment methods, so I think it's legitimate. But thank you for the warning - I've heard about those scams too and they're getting super sophisticated.

Does depreciation recapture apply even if you didn't actually claim depreciation on your tax returns during the rental period? I have a similar situation but didn't know I was supposed to depreciate the property during the rental phase.

Yes, depreciation recapture applies whether you actually claimed it or not. The IRS considers it "allowed or allowable" depreciation. So even if you didn't claim depreciation deductions during the rental period, you're still required to recapture what you could have claimed when you sell. This is one of the most common mistakes with rental properties. If you didn't claim the depreciation you were entitled to, you essentially lost those deductions but still have to pay the recapture tax. This is why it's always important to properly depreciate rental properties, even if they were previously personal residences.

You can do a 1031 exchange, but ONLY for the business portion of your property. Since your property was a personal residence first and only a rental for a short time, most of your gain would be allocated to personal use and wouldn't qualify for 1031 exchange.

Oh no, I didn't realize I'd owe self-employment tax too! How much should I expect to pay roughly on $4,800? I haven't saved anything specifically for taxes since this is the first I'm hearing about this.

For $4,800 in 1099 income, you'll owe approximately $735 in self-employment tax alone (15.3% of your net earnings). Then you'll also owe your regular income tax on top of that, which depends on your tax bracket and other income you might have. If this is your only income for the year, some of it might be offset by your standard deduction, but you'll definitely still owe the self-employment portion. There's a small deduction for half of your self-employment tax, but you'll still need to prepare for a tax bill. Consider making an estimated tax payment if possible to avoid underpayment penalties.

I used FreeTaxUSA last year for a very similar situation (research stipend on 1099-MISC). Federal filing WITH Schedule C was completely free. State filing was $14.99, but that was it - no surprise upgrades or "premium" features needed for the 1099 income. Their interface for Schedule C was actually pretty straightforward too.

$325 a month actually seems reasonable for everything you described. Does your CPA also help with tax planning throughout the year or just the compliance stuff? I'm trying to figure out if I'm overpaying at $450/month.

He does provide some tax planning, but it's fairly basic - mostly around estimated quarterly payments and year-end strategies like equipment purchases. We have two scheduled check-ins during the year specifically for tax planning. For more complex planning or when I have specific questions, I pay an additional hourly rate ($175/hr). So if you're getting comprehensive tax planning included in your $450, that actually might be a pretty good deal depending on the complexity of your business. My business is fairly straightforward though - single-member LLC with about $280K in revenue.

I tried the Upwork route last year. Found a decent bookkeeper for $35/hr who helped clean up my QuickBooks mess. Quality varies WILDLY though. Make sure they have actual accounting credentials and not just "I know how to use QuickBooks" experience.

So does that mean I need to prove I bought the other collectibles as investments rather than for personal enjoyment? How exactly do I demonstrate that to the IRS? I never formally tracked anything as "investment" vs "personal" when I was buying stuff.

You would need to show evidence that suggests investment intent rather than personal use. Things that help establish this include: keeping detailed records of purchases and sales, maintaining an inventory system, researching market values before buying, having a dedicated space for your collection, and having a history of actually selling items for profit rather than just accumulating them. The IRS looks at factors like frequency of transactions, effort to improve marketability of items, and whether you depend on income from sales. You don't need formal designation documents, but consistency in how you've treated the items. Even documenting that you've been researching values and market trends can help establish investment intent.

Is there like a specific number of items that triggers this? I sold maybe 30-40 things on eBay last year but most were just stuff from around the house, not really collectibles.