Does this apply even if you use one of those tax relief companies that advertise on radio? They always claim they can settle for "pennies on the dollar" but I assume that's just marketing hype?

Those "pennies on the dollar" claims are extremely misleading. What those companies are referring to is the IRS Offer in Compromise program, which is only available in very specific hardship situations where you genuinely cannot pay your tax debt. You have to prove significant financial hardship, and most people who apply get rejected. Those companies charge thousands in fees for something you can do yourself, and they often make promises they can't keep. They can't get any better deal from the IRS than you can get yourself. And yes, even with an accepted Offer in Compromise, the IRS will still apply interest to your original tax debt before determining your settlement amount.

Did you have to fill out any special forms for the penalty abatement? Or was it just handled over the phone?

For donor-advised funds, is there a minimum amount that makes sense to start with? And do you recommend any particular providers?

Most major investment firms like Fidelity, Vanguard, and Schwab offer donor-advised funds with minimums around $5,000 to open and $500-1,000 for additional contributions. I personally use Fidelity Charitable because their platform is user-friendly and their fees are reasonable. The amount that "makes sense" depends on your tax situation, but generally, it's most beneficial when you're bunching multiple years of charitable contributions into a single tax year to exceed the standard deduction threshold. For someone at your income level, contributing $10,000+ would typically provide meaningful tax benefits, especially if you're already itemizing deductions.

I'm a physician who went the real estate route. The tax benefits are real - depreciation, mortgage interest, and expense deductions. But be cautious about passive losses - at your income level, you may not be able to deduct those against your W2 income unless you qualify as a real estate professional (which is tough with a full-time medical career). Consider syndications or REITs if you want the benefits without active management. Just do your due diligence - there are many questionable deals out there.

Thanks for the insight! I was worried about the time commitment. REITs sound more my speed since I barely have time for hobbies as it is. Any particular types of REITs you'd recommend looking into first?

Good point! In NY we have that stupid S-corp franchise tax that adds up. What's the California situation like?

In California, S-corporations pay a 1.5% tax on net income with a minimum tax of $800, while C-corporations pay a flat 8.84% tax rate. For larger businesses with significant profits, this difference can be substantial - though you need to factor in the additional personal income tax on passed-through S-corp profits. The analysis really depends on how much profit you're retaining in the business versus distributing to shareholders. In my experience, the math favors S-corps for businesses with high distribution rates but can swing toward C-corps when reinvesting heavily.

Our accountant mentioned this too! Also something about being able to establish a medical reimbursement plan as a C-corp that you cant do with an S? Not 100% on the details tho.

4 Do you have to file state taxes for every year too? I lived in 3 different states during my unfiled period and I'm not even sure how to track down state W2 information from 4-5 years ago.

11 Yes, you absolutely need to file state taxes for each year as well. State tax authorities share information with the IRS, so once you file federal returns, states will likely expect their returns too. For getting old state W2 information, start with the wage transcripts from the IRS - they show all reported W2 income. Then contact each state's tax department directly. Most have systems similar to the IRS where you can request old tax documents. Some states are more aggressive than others about unfiled returns, so definitely don't skip this step.

5 So true. I lost out on almost $1,800 from my 2017 return because I waited too long to file. Actually makes me sick thinking about it. The IRS keeps that money if you don't claim it within the window.

1 Thank you for mentioning the income limits! I forgot to include that in my original post, but thankfully I'm well under those thresholds as a grad student. My stipend and part-time work put me around $35,000 for the year, so I should be eligible for the full Lifetime Learning Credit amount. Do you know if qualified expenses for LLC include the same things as AOTC? Like textbooks, supplies, etc., or is it more limited?

5 The Lifetime Learning Credit is a bit more restrictive on qualified expenses compared to the AOTC. For the LLC, qualified expenses generally include tuition and fees required for enrollment. AOTC is more generous and explicitly includes course-related books, supplies, and equipment that aren't necessarily paid to the educational institution. For the LLC, these additional expenses typically only count if they're paid directly to the school as a condition of enrollment. So if you bought textbooks from the campus bookstore or Amazon, those would likely qualify under AOTC but not LLC. However, if your course fees include a required materials fee paid to the school, that would count for LLC.

22 Yes, you absolutely can claim different education credits for different eligible students in the same tax year. You could claim the Lifetime Learning Credit for your graduate expenses and the AOTC for your daughter's undergraduate expenses on the same tax return. Just make sure you fill out a separate Form 8863 for each student and credit. The main restriction is that you can't claim both credits for the same student in the same tax year.