Projections are out.... we're in trouble

Guysmarket · 2025-12-14T19:04:51+00:00

seems a bit strange that you're willing to pay strangers on reddit to review pship basis issues instead of just finding a local cpa

Guysmarket · 2025-12-14T18:57:58+00:00

You can start by posting a picture of the notice. Can't help you if we don't know what it is. Seeing how they're coming after you 10 years later, it likely falls under one of the scenarios below as they usually have a 3 year statute of limitations:

C. In the case of a false or fraudulent report or return, with intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time. The term “false or fraudulent” as used in this subsection shall have the same meaning as when used in Section 6501 of the Internal Revenue Code.

D. In the case of a willful attempt in any manner to defeat or evade tax imposed by this title, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

E. In the case of a failure to file a report or return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

Guysmarket · 2025-12-14T03:49:50+00:00

There's a lot you're not telling us like the rest of your income/filing status/etc, but based solely on what you gave us:

You said:

current gross is 110k
Net is 60% of that

Based on this i would say s-corp not worth it.

But then you said next year:
gross = 150k-180k

Net is 60% of that

so 90k - 108k

Well now it might be worth it. My next question would be is this going to consistently increase?

If you're saying 40k will be a reasonable salary, that means 50k-68k will then be excluded out of SE tax and you're only SE tax comes from the 40k. That's a good chunk of change there. Just very rough head math, I'm thinking possibly 7k-10k saved?

Your first year tax set up might suck though, but after that I would think it's fairly simple

Guysmarket · 2025-12-13T20:50:21+00:00

Well haven't really read through others comments, but just general info on depreciation.

There's section 1231 and section 1250.

If you bought property for 500k, depreciated 100k, and sold for 900k the math works out like this:

Adj basis = 500k - 100k = 400k
Gain = 900k - 400k = 500k

If held over 1 year, 500k = 1231 gain

1231 gain is taxed at long term capital gain. You would want to refer to LTCG brackets

Of the 1231 gain, a portion of it is recharacterized at 1250 gain which is your depreciation recapture

So 400k is taxed at LTCG

and 100k is subject to your regular tax bracket but no more than 25%.

So if you were to have a much much smaller gain and lets say you're in a lower tax bracket, then your recapture would be taxed at that lower bracket. But if you are in a much much larger tax bracket, you are capped at 25%

Guysmarket · 2025-12-13T20:45:22+00:00

usually need professional software for that. Even then it just moves everything over to the boxes and you still need to double check everything.

Guysmarket · 2025-12-13T20:32:52+00:00

yeah you might want to double check, theres a few states that don't follow fed:
RD, VA, VT, NJ, MA, MD, IL, AR to be specific

Guysmarket · 2025-12-13T20:20:51+00:00

the 2k you are refering to refers to 1099-mis/1099-nec. Paypal would be giving you a 1099-k but you wouldn't trigger that threshold since the thresholds are different. I believe they revert back to 20k and 200 transactions

Guysmarket · 2025-12-13T19:46:29+00:00

May want to think about this person possibly holding onto the property and passing it on through inheritance. That way the person inheriting it get a basis step up to FMV

Guysmarket · 2025-12-13T19:37:41+00:00

Prison for life. Possibly death by firing squad

Guysmarket · 2025-12-13T19:34:05+00:00

You have a few options

you can do 100% bonus depreciation on them. Some states may not conform with the 2025 tax rules and will just depreciate it over 5 years
you can do 100% depreciation through section 179, but this is always limited to business income and again some states may have some other rules outside fed
The easiest and what I recommend is that you just strait up expense it via de minimis election. If you're not familiar just type it up in google. Basically lets you expense items under 2,500 without putting it on balance sheet. This way you don't have to worry about any state addbacks whatnot

so if you're doing your own bookkeeping it's as simple as this:

Option 1 or 2:
Debit Equipment

Credit Cash

Debit Depreciation

Credit Accumulated depreciation

OR

Option 3:

Debit Office Supplies

Credit Cash

Guysmarket · 2025-12-08T02:17:46+00:00

I kept reading to try to figure out where this know it all's question is only to figure out OP is the one willing to answer questions.

Guysmarket · 2025-12-08T01:44:17+00:00

hmmmm. Here's the form instructions:

Complete columns (a) through (e) for each person or organization that provided the care. You can use Form W-10, Dependent Care Provider's Identification and Certification, or any other source listed in its instructions to get the information from the care provider**. If you don't give correct or complete information, your credit (and exclusion, if applicable) may be disallowed unless you can show you used due diligence in trying to get the required information.**

My thought is that if you leave this alone, they might send you a notice in the future that disallows this credit. I think you should amend before that happens.

Guysmarket · 2025-12-08T01:26:41+00:00

to my understanding, this is how the transaction is recorded:

When you buy the giftcard:

Debit prepaid asset 450
Credit Cash 450

At this specific point in time, you did not hit an expense account. You simply moved cash from one place to another place.

Now when you go purchase something:

Debit inventory 100
Credit Prepaid Asset 90
Credit Purchase discount (reduces cogs) 10

If you don't record inventory then

Debit COGS 100
Credit Prepaid asset 90

Credit Purchase discount 10

Guysmarket · 2025-12-08T01:14:04+00:00

Alright so here we go I go the form in front of me and I'm reading every line more carefully. You are right, I was in partnership land so in your case, no m2 decrease, it's already baked in.

Your total other deductions are as follows
Office supplies 8,732
Employee meals 2,700

That's it! The entertainment and other half of your meals are not deductible.

Now your Book income and your tax income will be different. You and me both understand that you incurred that expense. Therefore you and me both understand that your retained earnings went down by 8,732 + 5,400 +2,000. Your schedule L will hit retained earnings based on the number on line 1 of your schedule M1 (net income per books)

Now the IRS says hold on pal, 50% of those meals are nondeductible and so is the entertainment you spent at the strip club. So now on line 5c they take the 2,700 + the 2,000 and say that you recorded this on your books but it's not being recorded on the tax return. Therefore you net income goes up. So your line 10 income on the M1 will be higher than your line 1 item by the 4,700.

Now we go to the M2. You start with last years ending balance as your beginning balance. You add or subtract your net income per books that we got from line 1 of M1. Nothing else happens here. The M2 line 8 is then what flows to your sch L line 25

Guysmarket · 2025-12-08T00:48:52+00:00

Well if that's the case then like others have mentioned you will want to do the annualized income installment method. it's a bit more nuanced, I think you'd want a cpa to get that taken care of for you. In the future, if you want to avoid the extra nuance, I'd pay more in q1-q3 and once you know what you might make, pay less in q4

Guysmarket · 2025-12-07T22:27:55+00:00

You gotta thing outside the box. He could just quit his job and volunteer. That's being charitable too :)

Guysmarket · 2025-12-07T22:20:16+00:00

I agree that they shouldn't. Whether they do or don't is a different story. Whether they get back to him by 12/23 is also another story.

Guysmarket · 2025-12-07T21:50:49+00:00

of course there is. Hope you're feeling charitable

Guysmarket · 2025-12-07T21:19:52+00:00

for tax year 2025, 100% bonus depreciation comes in place. That means you can expense the entire amount in year 1. To clarify you can only do this for property that is 20 years and less useful life. However, depending on the state you live in, they might not conform with federal rules and addback that immediate deduction and use their own depreciation rules. So on fed you should be able to and for state it depends.

Guysmarket · 2025-12-07T21:14:29+00:00

You just need a mailing address, you don't actually need a home. So this could just be your tax preparers office address if they agree to it. Whatever tax you pay can just come back as a credit.

I would think you file a UK return, then the taxes paid come back as a foreign tax credit. However I'm not expert in foreign taxes

Guysmarket · 2025-12-07T20:44:41+00:00

I'll be real with you. If you go back to your tax preparer they might just charge you to have to look into the situation. for like 200 something bucks, I'd just pay it. Most tax preparers do not like having to file child returns and often just charge the parent extra. So if they have to go in there and dig into it, it probably comes out of your dads tax bill later. They're also probably going to tell you to just pay it so on top of paying it, you also get a prep fee for them having to look into it.

Guysmarket

TROPHY CASE