Thanks for mentioning this! Unfortunately I'm pretty certain I owe them money since I had some 1099 income without any withholding. But that's good info to know for the future. Do you know if most tax preparers handle late returns like this or should I look for someone who specializes in them?

Most regular tax preparers can definitely handle late returns - it's pretty common and not as complicated as you might think. You don't need a specialized tax attorney or anything unless you have a really complex situation or owe an enormous amount. Any decent tax preparer or even the major tax software packages can guide you through filing a late return. They'll help calculate the penalties and interest too. If your situation is relatively straightforward (W2 income, maybe some 1099 work), you could even do it yourself with good tax software.

This is great advice! I got first-time abatement when I missed filing during my mom's cancer treatment. Saved me over $1,100 in penalties. The IRS agent was surprisingly understanding when I explained what happened.

1 That makes a lot of sense actually. I did get some collection calls before I paid it off. So if that's what happened, what should I do? Contact the original creditor?

5 Yes, contact the original creditor first. Ask them specifically if they sold your debt and then issued the 1099-C. Request documentation showing when they sold it and to whom. Then contact the collection agency and get proof that you paid them in full. You'll need both documents to show that you didn't actually have canceled debt - the debt was transferred, not forgiven. Submit a dispute to the creditor that issued the 1099-C and ask them to issue a corrected form. Keep copies of all communications and payment receipts in case you need to explain this situation to the IRS.

11 TurboTax has a specific section for 1099-C under "Income" and then "Less Common Income." It'll ask for all the information from the form and help determine if any exclusions apply. Just make sure you have the actual 1099-C in front of you when you get to that section.

Good point! Our AGI is actually around $325,000 so we're approaching that threshold. Does that change your recommendation on whether we should include the rental losses in QBI or not?

Since you're still below the threshold (but approaching it), you still likely benefit from excluding the rental losses from QBI. At your income level, you can take the full 20% deduction on positive QBI without the wage/property limitations. If including rental losses would reduce your positive QBI from your wife's self-employment, then excluding them makes perfect sense. However, if your income rises above the threshold in future years, the calculation becomes more complex, and including some loss activities might occasionally be beneficial to stay under the phase-out limits.

I've used both TaxAct and FreeTaxUSA. TaxAct seemed to handle the QBI rental questions better and was more clear about the safe harbor requirements. It specifically asked about the 250-hour test and contemporaneous records, while FreeTaxUSA was more vague.

8 MONTHS?? Ugh that's so much worse than I thought. Do you know if there's any way to check the status of an amended return after you submit it?

You can check the status of your amended return using the "Where's My Amended Return" tool on the IRS website. You'll need your SSN, date of birth, and zip code. The tool will tell you if it's been received, adjusted, or completed. But honestly don't expect updates very often - mine sat on "received" for about 6 months before changing to "adjusted". The key thing is to pay whatever additional tax you calculate when you submit the amendment. That way even if it takes forever to process, you won't be racking up additional penalties and interest.

This is good advice. I set up a payment plan too after I had to amend 3 years of returns. The interest rates aren't great but way better than credit card debt. And it keeps you from getting nasty letters from the IRS.

What about directors loan accounts? I've heard you can borrow from your company?

Yes, director's loan accounts are an option, but they come with strict rules. You can borrow from your company, but if the loan exceeds £10,000, it's considered a benefit in kind and you'll pay income tax on it. Additionally, if the loan isn't repaid within 9 months after your company's year-end, the company will have to pay a temporary tax (currently 33.75%) on the outstanding amount. When the loan is eventually repaid, the tax can be reclaimed, but it creates cashflow issues. Also, if you repeatedly take out loans and repay them (bed and breakfasting), HMRC has anti-avoidance rules that will catch this. Director's loans are legitimate but not a good long-term strategy for extracting value compared to the salary+dividend approach.

Yes! My brother-in-law tried something similar with his plumbing business. HMRC did a routine VAT inspection which led to them looking deeper at his accounts. They found personal expenses being paid directly from the business account and hit him with additional income tax, NI contributions, penalties AND interest going back 4 years. Cost him over £30k in total and now he's on their high-risk list for future audits.