Something everyone seems to be missing here - if these are ISOs and you're trying to qualify for LONG-TERM capital gains treatment, you need to hold the shares for BOTH: 1) At least 1 year after exercise 2) At least 2 years after the option grant date If you don't meet BOTH holding periods, your gain gets taxed as ordinary income even if they're ISOs. This is called a disqualifying disposition. With pre-IPO companies, people often exercise close to IPO, then get caught by the 6-month lockup period after IPO, and end up selling before they meet the holding requirements. Then they're shocked when the gain is taxed as ordinary income instead of getting favorable LTCG rates.

Former startup finance person here. One thing that's often overlooked: your company might offer an early exercise option where you can exercise unvested shares. If that's available, you might want to consider it NOW while FMV is BELOW strike price. This has two huge advantages: 1. No AMT issues since there's no spread (actually a paper loss) 2. Your long-term capital gains holding period starts immediately You'd file an 83(b) election within 30 days of exercise. When you eventually sell after IPO, the entire gain from your $3.20 cost basis would be long-term capital gains (assuming held >1yr). The downside is you're putting cash at risk on unvested shares, but if you're bullish on the company and can afford it, this is often the most tax-efficient approach.

I went through this exact same situation last year with my daughter! After doing extensive research and consulting with our financial advisor, here's what I learned: The $575 enrollment deposit is definitely a qualified 529 expense since it's being applied toward housing costs. Housing (room and board) is explicitly listed as a qualified education expense as long as your daughter is enrolled at least half-time. For the $65 application fee, unfortunately it's not technically qualified because it was paid before enrollment. The IRS is pretty strict about the timing - expenses need to be for an enrolled student. However, practically speaking, many families do use 529 funds for these fees without issues. My advice: definitely use the 529 for the enrollment deposit since that's clearly qualified. For the application fee, you could either pay it out of pocket to be completely safe, or use 529 funds knowing there's a small technical risk. The potential penalty would only apply to the earnings portion of that $65 withdrawal, so we're talking maybe a few dollars in penalties at most. Keep good records either way - save all the documentation showing what each fee was for and when it was paid. This will help if you ever need to justify the expenses.

I just went through this exact situation with my daughter's college applications last month! After consulting with both our tax advisor and calling the IRS directly (which took forever, but I finally got through), here's what I learned: The $575 enrollment deposit is absolutely a qualified 529 expense since it's being applied toward housing. The IRS considers room and board qualified expenses for students enrolled at least half-time, and since your deposit is going toward housing costs, you're completely in the clear there. For the $65 application fee, unfortunately it's technically not a qualified expense because it was paid before enrollment. The IRS defines qualified expenses as those incurred "for the enrollment or attendance of the designated beneficiary at an eligible educational institution." Since application fees are required just to apply (not for actual attendance), they fall into a gray area that the IRS generally doesn't consider qualified. That said, the practical risk is minimal. Even if you used 529 funds for the application fee and it was later deemed non-qualified, you'd only owe taxes and penalties on the earnings portion of that withdrawal - we're talking maybe $5-10 in penalties at most. My recommendation: definitely use the 529 for the enrollment deposit, and either pay the application fee out of pocket or accept the minimal risk. Either way, keep all your documentation - receipts, college billing statements, and your 529 withdrawal records. Congratulations on your daughter's acceptance!

I can definitely confirm that CAF numbers follow the 8-digit + 1-letter format that everyone has described. As someone who processes these regularly, your instinct is correct - the 8th position should be a number, not a letter. One additional tip that might help with future IRS correspondence: if you're having trouble with handwritten documents, try looking at them under different lighting conditions or angles. Sometimes the slight shadows or indentations from the writing can help distinguish between similar-looking characters like 8 and B. Also, if you have a smartphone, the magnification feature can often reveal details that aren't obvious to the naked eye. Since you're being so careful about getting this right (which is smart!), you might also want to make a clear photocopy or scan of your CAF number document once you've confirmed it. Having a high-quality digital backup can save you from having to decipher the handwriting again in the future, especially during busy filing periods when you need quick reference access.

I've been following this thread as someone who recently went through the CAF number application process myself, and I wanted to share one more verification tip that helped me. If you happen to have your original CAF application materials (Form 2848 or the online application confirmation), sometimes the IRS includes a "format example" or reference guide in the same packet that shows the proper CAF number structure. In my case, there was a small text box on page 2 of my notification letter that said something like "CAF numbers consist of 8 numeric digits followed by 1 alphabetic character" with an example format like "12345678A". Having that official format reference right in the same document gave me complete confidence when I was second-guessing my own handwriting interpretation. Also, just to echo what others have said - you're absolutely right to be cautious about this. I've seen colleagues have e-file rejections over simple CAF number errors, and it's much easier to verify it once upfront than to deal with rejected returns later. The consensus here is solid: 8 numbers + 1 letter, so that 8th position is definitely a number. Good luck with your client filings!

Kinda related question but has anyone actually successfully carried forward an NOL on their taxes using TurboTax? I tried last year and the software kept getting confused about my carryforward amount.

Just wanted to add something that might help others in similar situations - make sure you understand the difference between business losses and capital losses when calculating your NOL. As a freelance graphic designer myself, I made the mistake of mixing up equipment depreciation with direct capital losses in my first year. Your expensive computer and design software should typically be depreciated over several years (or you might qualify for Section 179 expensing), but this is different from capital asset sales that are subject to the $3,000 annual limit you mentioned. For your NOL calculation, focus on your Schedule C business income/losses rather than capital gains/losses. The business losses from your design work, office rent, and legitimate business expenses can contribute to an NOL, but make sure you're categorizing everything correctly. I learned this the hard way when I had to file an amended return! Also keep excellent records of everything - client contracts, invoices, business bank statements, receipts. The IRS tends to scrutinize creative businesses more closely, so documentation is key if you ever get audited.

I've been volunteering as a tax preparer for nonprofits for over a decade, and I wanted to add a few thoughts to this discussion. For foundations with assets under $500K, I've had good success with TaxSlayer's nonprofit module, which typically runs about $89 for 990-PF e-filing. It's not the most sophisticated interface, but it gets the job done and includes basic audit protection. One strategy I recommend to all the small foundations I work with is to join the National Association of Charitable Gift Planners or similar professional organizations. Many offer discounted software access to members, and the annual membership fee is often less than what you'd save on tax software alone. Also, don't overlook the possibility of filing for an extension if you're shopping around for better software deals. The 990-PF extension (Form 8868) is free to file and gives you additional time to find the most cost-effective solution for your actual return. Finally, for foundations doing this work year after year, consider the learning curve investment. While switching software annually to chase the lowest price might save money short-term, there's real value in becoming proficient with one platform that handles your specific reporting needs well.

I've been following this thread with great interest as our small environmental foundation faces the exact same challenges. After reading everyone's experiences, I decided to research a few additional options that might be helpful for the community. One platform I discovered is FreeTaxUSA's business/nonprofit module, which offers 990-PF filing for around $60-70. While not as feature-rich as some alternatives, it covers the basics well and includes customer support during filing season. I also wanted to mention that some regional Community Foundation associations offer shared services programs where multiple small foundations can access discounted professional tax preparation services. In our area (Pacific Northwest), we found a program that provides 990-PF preparation for $200 per foundation when you join a group of 5+ small foundations. For those considering the DIY software route, I'd recommend creating a simple spreadsheet to track your annual software costs, time invested, and any compliance issues over 2-3 years. This helped me realize that while software seems cheaper upfront, the time investment (especially for investment reporting) was costing our foundation more than we initially thought when we factored in board members' professional hourly rates. Thanks to everyone for sharing their experiences - this thread has been incredibly valuable for small foundation administrators like us who are trying to be good stewards of limited resources.