Don't forget to request an abatement of any penalties they've proposed in the CP2000! Since this was your first time dealing with ISOs and you're not trying to hide income (it was on your W-2), you qualify for "reasonable cause" relief from penalties. Include a brief statement saying something like: "I request abatement of any penalties as I made an unintentional error in not reporting the 1099-B. The income was properly reported on my W-2 as shown in the attached documentation, demonstrating there was no intent to underreport income." I was in almost the identical situation in 2020 and not only did they remove the proposed tax adjustment, they also waived all penalties when I explained it was my first time dealing with equity compensation and I didn't understand the dual reporting requirement.

This is a stressful situation but definitely manageable! I went through something very similar with my ISO exercise in 2020. The key thing to understand is that the IRS computer system flagged this because it saw income reported on your 1099-B but couldn't automatically match it to the corresponding W-2 income. When you respond to the CP2000, you'll want to clearly show the connection between your W-2 and 1099-B. Look for Box 14 on your W-2 - many employers specifically note ISO income there, or it might be included in your regular wages in Box 1. Your employer should also have provided an equity statement showing the details of your ISO transaction. A few critical points for your response: 1. Send copies of both your W-2 and 1099-B 2. Include any equity compensation statements from your employer 3. Write a clear explanation showing how the exercise spread was already taxed as ordinary income 4. Calculate any small capital gain/loss from the actual sale price vs. fair market value at exercise 5. Request penalty abatement since this was an unintentional reporting error Don't panic about the deadline - you have options. If you're running short on time, you can call the IRS to request an extension while you gather documentation. The CP2000 is a proposal, not a final assessment, so you have the right to dispute it with proper documentation.

Lots of other countries already do what you're suggesting! In the UK they have a system called PAYE (Pay As You Earn) where taxes are automatically calculated and withheld for most employees. Sweden, Denmark, and Spain all send pre-filled tax returns to citizens - you just verify the information and submit. The US system is deliberately kept complex and manual. The technology for automated taxes has existed for decades.

This is exactly why I've been pushing for return-free filing for years! As a tax professional, I see how unnecessarily complicated we've made something that could be simple for most Americans. The IRS already has the capability to pre-populate returns - they actually tested a pilot program called "Ready Return" in California back in 2006 that worked great. Participants loved it and it had a 99% accuracy rate. But it was killed due to industry pressure. For about 70% of taxpayers who take the standard deduction and have straightforward income, the math is already done. The IRS knows your wages, interest, and most other income sources. They could easily send you a pre-filled return to review and approve, just like other countries do. The real barrier isn't technical - it's political. We need to demand that our representatives prioritize taxpayer convenience over corporate profits from the tax prep industry.

If she's getting $9,700 back, she should really update her W-4 with her employer. She's having waaaay too much withheld from each paycheck! That's over $800 a month she could be getting in her regular pay instead of waiting for a refund. I used to do the same thing until I realized I could be using that money throughout the year for my bills or putting it into investments instead of giving the government an interest-free loan.

As someone who works in tax preparation, I can confirm that a $9,700 refund for a single parent with two children making $62,000 is definitely possible and likely legitimate. Here's how it could break down: - Child Tax Credit: $4,000 ($2,000 per child) - Earned Income Tax Credit: Could be $1,000-2,000 depending on exact income and ages of children - American Opportunity Tax Credit: Up to $2,500 if she or children are in college - Child and Dependent Care Credit: Up to $2,100 for childcare expenses - Overwithholding from paychecks throughout the year The key thing is that many of these credits are refundable, meaning even if she owed $0 in taxes, she'd still get money back. That's what creates these large refunds for working families with children. If she's concerned about accuracy, she could always get a second opinion from another tax professional or use one of those verification services others have mentioned. But from what you've described, this doesn't sound like a red flag to me - it sounds like she's getting the credits she's entitled to as a working parent.

I feel your pain - went through something very similar last year with day trading crypto. The wash sale rules are brutal when you're actively trading the same securities. One thing that helped me was getting organized with exact documentation of every trade and the dates. If you haven't already, make sure you have detailed records of all your trades with exact buy/sell dates and amounts. Sometimes there are calculation errors on the 1099s, and having your own records can help identify discrepancies. Also, if you sold any of those positions with built-in disallowed losses in early 2025 (and didn't repurchase within 30 days), you might be able to carry some of those losses forward. Definitely worth consulting a CPA who specializes in trading taxes - they've seen this situation countless times and might spot something you missed. The $8k tax bill is painful, but don't give up without exploring all options first.

I completely understand your frustration - this exact scenario happened to me two years ago and it felt devastating at the time. The good news is that those disallowed losses aren't gone forever, they're just deferred. They get added to the cost basis of your replacement shares, so when you eventually sell those positions (without repurchasing within 30 days), you'll get the benefit of those losses. For your immediate situation, I'd strongly recommend getting a second opinion from a CPA who specializes in securities transactions. Sometimes there are nuances in how the wash sales were calculated or reported that can be corrected. Also, make sure your broker correctly reported any year-end positions you were still holding - errors in cost basis reporting are more common than you'd think. Going forward, consider setting up alerts for yourself 30 days before and after any loss sales, or use completely different securities if you want to maintain similar market exposure. Some traders use sector ETFs instead of individual stocks to avoid this trap. The learning curve is expensive, but you're definitely not the first person to go through this!

One thing nobody mentioned - if you owe more than $54,000, the IRS can now revoke your passport or prevent you from getting one! They're required to notify you before doing this, but it's definitely beyond a "financial penalty" and could seriously impact your life if you travel internationally for work or family. Also, if you owe more than $25,000, you can't use the online payment plans and things get more complicated. The bigger your balance gets (with all those penalties and interest compounding), the fewer options you have.

The passport revocation process is actually pretty straightforward from the IRS side. Once you have a "seriously delinquent tax debt" (over $54,000 including penalties and interest), the IRS sends your information to the State Department through an automated system. The State Department then either denies your passport application or revokes your existing passport. You get advance notice - the IRS has to send you a Notice CP508C before certifying your debt to State. But once that happens, you basically can't travel internationally until you either pay in full, set up an approved payment plan, or get the debt declared currently not collectible due to hardship. The scary part is how fast you can hit that $54k threshold when penalties and interest are compounding. If you originally owed $20k and let it sit for a few years, you could easily cross into passport revocation territory without realizing it.