This is a really helpful thread! I'm in a similar boat with ISOs from my startup and was getting overwhelmed by all the AMT implications. One thing I wanted to add - make sure you check with your company's stock plan administrator about any specific requirements they have for disqualifying dispositions. My company required me to notify them within 30 days of the sale so they could properly report the compensation income on my W-2. Some companies handle this automatically through their brokerage, but others need manual notification. Also, if your company stock is still private/pre-IPO, the calculation of FMV at exercise might need additional documentation for the IRS. The tax implications everyone's discussed are spot on, but don't forget about the administrative side with your employer. Better to get ahead of it now than scramble at tax time!

I went through a similar situation with my ISOs last year and can share some additional considerations beyond the great advice already given here. One thing that really caught me off guard was the state tax implications - even though the federal treatment becomes straightforward with a disqualifying disposition, some states have different rules. Also, if you're planning to do the same-day sale and rebuy strategy, make sure you have enough cash flow to handle the immediate tax hit. With a disqualifying disposition, you'll owe ordinary income tax on that $16,250 bargain element (1,250 shares × $13 spread) in the year of sale, which could be a significant amount depending on your tax bracket. One more practical tip - if your company uses a third-party administrator like Carta or Shareworks for stock plans, they often have calculators that can model different sale scenarios including the tax implications. Might be worth checking if your company has something like that available before you make your final decision. The wash sale rule clarification from earlier comments is spot on - since you're selling at a gain, you're in the clear there. But definitely coordinate with your company on the reporting requirements as others mentioned!

Just to add another perspective here - I've been running my single-member LLC with S-Corp election for 4 years now, and can confirm that Form 2553 is definitely a one-time filing. Once you get that approval letter from the IRS, you're set until you voluntarily terminate or something goes wrong. The real ongoing work is making sure you stay compliant with payroll requirements and file Form 1120-S annually. I learned the hard way that you can't just ignore the reasonable salary rule - the IRS did flag me in year 2 when I was taking mostly distributions and barely any salary. Had to adjust and provide documentation showing how I calculated a reasonable wage for my role. One tip: keep that original S-Corp approval letter from the IRS in a safe place. I've needed to reference it multiple times over the years for various business purposes, and it's your proof that the election is valid and when it took effect.

Great question, Joshua! I can confirm what others have said - Form 2553 is absolutely a one-time filing. Once the IRS approves your S-Corp election (which you already have confirmation for), it stays in effect indefinitely unless you voluntarily revoke it or violate the S-Corp eligibility requirements. The confusion you're seeing online probably comes from mixing up the initial election form with the ongoing filing requirements. What you DO need to file annually now is Form 1120-S (S-Corporation Income Tax Return) by March 15th, and you'll need to issue yourself a Schedule K-1 as the sole shareholder. Since you're already into your second year with S-Corp status, make sure you're staying compliant with the reasonable salary requirement - you need to pay yourself wages through payroll (not just distributions) for any work you do in the business. This is probably the most important ongoing requirement to avoid IRS scrutiny. Keep that original approval letter somewhere safe - you may need it for banking, business applications, or if questions ever come up about when your election took effect.

Great question! I went through this exact same confusion when I bought my Tesla Model 3 last year. The $7500 is indeed a tax CREDIT, not a deduction - meaning it reduces your actual tax bill dollar-for-dollar, which is much better than a deduction would be. At $130k income, you're well under the income limits for single filers ($150k), so you should qualify. The "non-refundable" part just means if you only owe $5000 in taxes for the year, you can only use $5000 of the credit (you don't get the extra $2500 back as a refund). But with your income level, you'll almost certainly owe more than $7500 in federal taxes, so you should be able to use the full credit. One important thing to double-check: make sure the specific Tesla model and trim you're buying meets the price cap requirements ($55k for cars, $80k for SUVs/trucks). Some higher-end configurations don't qualify. Also verify that Tesla still qualifies for the full $7500 - the credit amount can change based on battery component sourcing. Good luck with your purchase! The credit really does make a significant difference in the total cost.

One more thing to consider - timing matters! If you're planning to buy in the next few months, be aware that the point-of-sale rebate option is now available for many dealers. This means instead of waiting until you file your taxes to get the $7500 benefit, you can potentially get it applied as a discount right at the dealership when you purchase. However, not all dealers participate in this program, and if you use the point-of-sale option, you can't also claim the credit on your tax return - it's one or the other. The upfront discount can be nice for cash flow, but make sure you understand how it works with your specific dealer. Also, keep all your paperwork! You'll need the dealer's certification that the vehicle qualifies, along with your purchase agreement showing the VIN, to properly claim the credit if you don't use the point-of-sale option.

I had almost the exact same situation with a CP30 notice last year! The key thing to understand is that the IRS penalty isn't just about whether you paid enough total tax - it's about the timing of when you made those payments throughout the year. Even though you overpaid by about $2,200, if you made most of those payments late in the year (like in Q4), you can still get hit with the underpayment penalty for the earlier quarters. The IRS basically wants you to pay taxes as you earn income, not all at once at the end. Before you spend hours on hold with the IRS, I'd suggest looking into "First-Time Penalty Abatement" if you've had clean tax compliance for the past few years. The IRS will often waive penalties for first-time mistakes if you have a good payment history. You can request this over the phone or in writing - might save you the $120 penalty entirely!

I went through this exact same situation a few months ago and it was so frustrating! The CP30 notice makes it look like you owe money even when you clearly overpaid for the year. What helped me understand it was realizing that the IRS has these "safe harbor" rules for estimated taxes. Basically, you need to pay either 90% of the current year's tax liability OR 100% of last year's tax (110% if your prior year AGI was over $150k) - AND you need to make these payments evenly throughout the year in quarterly installments. So even though your total payments exceeded what you owed, if you made most of those payments in Q4 instead of spreading them across all four quarters, you'd still get hit with the penalty for underpaying in the earlier quarters. The good news is that this penalty is often waivable! Since you clearly had the money to pay your taxes (you overpaid!), you can request penalty abatement based on reasonable cause or first-time penalty relief if you have a clean compliance history. Don't just pay it without trying to get it removed first.

Just wanted to add a perspective from someone who went through IRS scrutiny on this exact issue. I had a similar situation with my S-Corp - large cash reserves and what the IRS deemed an "unreasonably low" salary of $30k while the business was generating much more. The IRS audit was triggered not by the distribution itself, but by the salary-to-distribution ratio. They reclassified $45k of my distributions as salary, which meant I owed additional payroll taxes plus penalties and interest. It was expensive and stressful. Here's what I learned: The IRS uses several factors to determine "reasonable compensation" including what similar businesses pay for comparable work, your qualifications/experience, time devoted to the business, and the company's profitability. With $350k in accumulated cash, you're likely generating significant income, which makes a $24k salary look suspicious. My CPA now recommends the "60/40 rule" as a starting point - roughly 60% reasonable salary, 40% distributions. It's not a hard rule, but it's defensible. Before taking any large distribution, I'd strongly suggest increasing your salary to a more reasonable level first. The payroll taxes hurt, but they're much less painful than an audit and reclassification penalties. Also consider that business HYSA rates are often very competitive now - you might get 4%+ while keeping everything properly separated.

As someone who went through a similar situation with my S-Corp, I'd echo the concerns others have raised about your $24k salary. That seems dangerously low given the cash accumulation in your business account. Here's my practical suggestion: Before moving any money, work with a CPA to determine what your reasonable salary should actually be. In my case, I was underpaying myself by about $40k annually, which created problems when I tried to take large distributions later. Once you've adjusted your salary to a defensible level, you have a few good options: 1. **Business HYSA** - This is probably your safest bet. Many banks offer business savings accounts with competitive rates (often matching personal account rates). You keep proper separation while earning interest. 2. **Gradual distributions** - If you do want to move money personally, consider spreading it over 2-3 years rather than one large transfer. This helps with tax planning and looks less suspicious. 3. **Document everything** - Whatever you do, make sure it's properly recorded in your corporate minutes with clear business justification. The key is getting your salary right first. The IRS looks at the total compensation picture, and a $24k salary with $350k in business cash is going to raise eyebrows. Fix the salary issue, then you'll have much more flexibility with the excess cash without audit risk.