Thank you so much for this detailed explanation! Quick question - when I refile the rejected return, should I attach any kind of explanation letter about why I'm filing so late? And does using tax software still work for submitting prior year returns or do I need special forms?

You don't need to attach an explanation letter when you refile, but it's not a bad idea to include a brief statement explaining you weren't aware the original filing was rejected. This won't prevent penalties automatically but could help if you request penalty abatement later. Most tax software can handle prior year returns, but you may need to purchase the specific tax year you need as they don't always keep all years available in the current software. Some companies offer prior year versions on their websites. If your situation is fairly straightforward, you can also download the forms directly from IRS.gov for the specific tax year and file by mail. Just be absolutely certain you're using the forms for the correct tax year - they change slightly each year.

I used a tax attorney last year for a similar situation with rejected returns AND self-employment complications. It cost about $1200 but was 100% worth it for the peace of mind. They handled everything, negotiated with the IRS on penalties, and even found deductions I'd missed that nearly covered their fee. Just make sure you find one who specializes in tax resolution, not just general tax preparation.

That's really helpful to know! The $1200 seems steep but honestly if they can find deductions I missed and handle the IRS negotiations, that sounds worth it. Did you find them locally or use some online service?

That's technically tax evasion though. The IRS doesn't care what payment method you use - income is income. Your friends are still supposed to report that money as taxable income, and you're supposed to deduct it properly as a business expense with documentation.

I mean, I'm just sharing what most creators do in practice, not saying it's 100% by the book. You're right that technically all income should be reported. I guess a better suggestion would be to keep payments under the $600 threshold when possible if you want to minimize paperwork, but still document everything properly on your end so you can deduct those expenses. Even if you don't issue a 1099, you can still claim those payments as legitimate business expenses with proper documentation.

That's not how it works. If you're paying someone for services or work they've done for your business, it's not a gift - it's compensation. The IRS looks at the nature of the payment, not what you call it. Calling business payments "gifts" to avoid taxes is misrepresentation that could get you in trouble.

Thank you so much for these specific steps! I was completely lost. I just followed what you said and it worked perfectly. The software did ask me about the earnings and then calculated everything correctly. Really appreciate you taking the time to explain the exact process!

So does this mean the original $5700 contribution isn't taxed again? I'm confused about why the earnings are taxed but not the original contribution amount.

You HAVE to use your residential address on the BOI form. I tried using my business address and my application got rejected. Had to resubmit with my home address. The whole point of this law is transparency about who actually owns these companies, so they're strict about it.

Well that sucks but thanks for the info. I guess I'll have to use my home address then. Just feels like a privacy invasion when I've been so careful about keeping my home address separate from my business for so long.

For existing companies formed before January 1, 2024, you don't need to report company applicant information at all - just the beneficial owners. If your LLC was formed in 2020, you only need to report yourself as the beneficial owner, not your accountant who helped set it up. If your LLC had been formed after January 1, 2024, then yes, you would need to include your accountant as a company applicant since they filed the formation documents for you.

Thank you so much! That's a huge relief - my accountant retired and moved to Florida so I wasn't sure how I was going to get all his information for the filing.

How do the donor-advised funds work? I keep hearing about them but don't really understand the benefits.

Donor-advised funds are essentially charitable investment accounts. You contribute cash, securities, or other assets to the fund and take an immediate tax deduction in the year you contribute. The money can then be invested and grow tax-free, and you recommend grants to your favorite charities over time. The main benefit is timing - you can make a large contribution in a high-income year to get over the standard deduction threshold, take the full tax deduction immediately, but then distribute the actual donations to charities over multiple years. Many financial institutions offer them with relatively low minimums nowadays. They're especially powerful if you donate appreciated stock because you avoid capital gains tax on the appreciation.

There's an important distinction here. If your donation was made as a business expense for business purposes (like sponsoring a local event with your business name displayed), then yes, it might be deductible as a business advertising expense on Schedule C. However, this is different from a charitable contribution. True charitable donations - even those made from your business account - are still personal itemized deductions and not business expenses. If your accountant classified a true charitable donation as a business expense, that's potentially problematic from an IRS perspective.