This is exactly the kind of practical advice that would have saved me so much time when I was starting out! The point about manually entering beginning basis in ProTax is crucial - I actually made that exact mistake on my first few S-Corp returns and had to go back and correct everything. Your suggestion about Form 7203 is really helpful too. I've been hesitant to use optional forms, but having that standardized IRS format for documentation makes a lot of sense, especially for audit protection. Do you typically generate Form 7203 for all your S-Corp clients, or only in certain situations like complex ownership structures or when you anticipate potential IRS scrutiny? Also, your comment about over-documenting really resonates. I'm learning that with S-Corp basis, it's much better to have too much documentation than to try to reconstruct years of basis calculations later when a client gets audited or changes preparers.

I use Form 7203 selectively rather than for every S-Corp client. I typically generate it when there are multiple shareholders with different ownership percentages, when there have been significant mid-year changes in stock ownership, or when the client has a history of aggressive tax positions that might attract IRS attention. For straightforward single-shareholder S-Corps with simple transactions, the supplemental basis worksheet is usually sufficient. But for anything involving debt basis utilization, suspended losses carrying forward, or situations where distributions exceed stock basis, I find Form 7203 provides that extra layer of documentation that gives both me and the client peace of mind. The key is being proactive about documentation. I've found that taking an extra 15-20 minutes to properly document basis calculations during preparation can save hours of reconstruction work later. And trust me, you don't want to be the preparer trying to explain to an IRS agent why you can't support the basis calculations that allowed $50,000 in losses to flow through to the shareholder's personal return!

Great questions! While you're not legally required to provide basis worksheets to clients, it's definitely considered a best practice - and I'd argue it's almost essential for S-Corp clients. Think of it as part of your value-add service. Clients need this information to properly report future transactions, and if they ever switch preparers, having clean basis records makes the transition much smoother. Regarding other software platforms - yes, this is pretty much a universal challenge! I've used Drake, Lacerte, and UltraTax over the years, and they all handle S-Corp basis tracking similarly. The worksheets are there, but they're usually tucked away in supplemental schedules rather than being front and center like partnership capital accounts. Each software just organizes them slightly differently (Drake calls them "Client Letters," Lacerte puts them under "Other Statements," etc.). The key is learning where your specific software hides these worksheets and making sure you're consistently using them. I always include the basis worksheet in my client packages by default now - it prevents so many headaches later when clients ask about their basis for planning purposes or when they're considering distributions vs. salary strategies.

As someone who's worked with multiple software platforms over the years, I can confirm that this "basis worksheet hunt" is definitely universal across all major tax software! Each program handles it slightly differently - in Drake you'll find it under "Miscellaneous Forms," Lacerte puts it in "Client Organizer," and UltraTax has it under "Supporting Schedules." What I've learned is that software developers seem to treat S-Corp basis tracking as supplemental rather than core functionality, which is frustrating given how critical it is for compliance. The good news is that once you know where to look in your specific software, it becomes second nature. Regarding providing basis worksheets to clients - while not legally required, I consider it essential professional service. Your clients will need this information for future years, whether they stay with you or move to another preparer. Plus, having documented basis calculations protects both you and your client if the IRS ever questions distribution treatments or loss limitations. I've made it standard practice to include basis worksheets in every S-Corp client package, and clients really appreciate having that documentation for their records.

This is such a helpful and comprehensive explanation! As someone who's been anxiously checking my transcript multiple times a day since the codes changed, your breakdown really puts things into perspective. The idea that they're "updating your file to reflect current status rather than keeping a historical record" makes so much sense - I was wondering where that 424 code went and if it meant something was wrong with my filing. Your point about this potentially being routine verification for newer taxpayers is particularly relevant to my situation. I did have some complexity with reporting foreign income from before I immigrated, so that could definitely explain why they flagged it for review initially. I'll try to be more patient and check for that 846 code over the next week or two instead of obsessively monitoring every day. Thank you for the reassurance - it's exactly what I needed to hear as someone still learning how this system works!

This is an important question that many overlook. Unlike the federal government, states have their own rules about residency and tax obligations. If you established residency in Austria and have genuinely cut ties with California (no property, bank accounts, driver's license, etc.), you likely don't need to file CA returns. However, California is notorious for aggressively claiming people remain residents. If you still have any connections to CA, it's worth addressing this as part of your Streamlined filing. Some states have their own voluntary disclosure programs separate from the IRS version.

@Jamal Carter This is super helpful, thanks! I m'definitely feeling overwhelmed by all the different forms and requirements. Quick question about the FBAR forms - when you say 6 years, does that mean I need to report every single bank account I ve'had during that period, even ones I closed? I switched banks a couple times and I m'worried about tracking down old account information. Also, did your CPA handle the actual submission to the IRS or did you have to file everything yourself? I m'trying to figure out if the €2,800 you paid included the filing service or just the preparation.

Certified copies are fine for most docs except SS cards - those need to be original.

Totally agree! I'm new to this community but have been watching all the tax prep changes this year. It's crazy how much more documentation they're requiring now. I appreciate tax pros like @Chloe Anderson taking the time to explain this stuff - saves us all from showing up unprepared and wasting everyone s'time. Better to know what to expect going in!

This is exactly the kind of clarification that can save people from unnecessary stress! I'm glad Admin_Masters caught this distinction because I was getting caught up in the urgency too. Just to add another perspective as someone who's been through both scenarios - when you do eventually exercise those ISOs, make sure you understand the Alternative Minimum Tax (AMT) implications as a non-resident. The 83(b) election can be beneficial for ISOs because it helps you avoid AMT on the spread between exercise price and fair market value, but the calculations get complex when you're dealing with international tax situations. Also, since you now have more time to plan, I'd strongly recommend getting that ITIN application started anyway. Even though you don't need it immediately for the 83(b) election, you'll definitely need it when you do exercise the options, and the ITIN process can take months. Better to have it ready when you need it rather than trying to rush it later. The silver lining of this timing mix-up is that you now have the opportunity to properly plan both the US and Brazilian tax implications before making any irreversible elections. Take advantage of that extra time!

This is really comprehensive advice, especially about the Brazilian tax planning! As someone new to navigating international equity compensation, I'm realizing there are so many layers to consider beyond just the US tax implications. Your point about documenting everything from the start is particularly valuable - I can already see how easy it would be to lose track of important details over time, especially with fair market value assessments that might change frequently for a growing startup. I'm curious about the Brazilian elections you mentioned with the Receita Federal. Do you know if these need to be made within a specific timeframe, or can they be done closer to when I actually exercise the options? I want to make sure I'm not missing any Brazilian deadlines while I'm focused on understanding the US requirements. Also, regarding the AMT implications you and @1f57cb1d9e47 mentioned - is this something that typically makes the 83(b) election more or less attractive for non-residents, or does it depend entirely on individual circumstances and the company's valuation trajectory? Thanks for helping me think through all these interconnected pieces - it's clear I need to take a more holistic approach to planning this rather than just focusing on the US tax aspects!

Great question about the Brazilian timing! The Receita Federal elections I mentioned (particularly the "carnê-leão" monthly declarations for foreign income) generally need to be made in the tax year when you receive or are deemed to receive the income. For stock options, this typically means the year you exercise, not when you receive the grant. However, Brazil has some complex "deemed realization" rules that can sometimes trigger tax obligations earlier, especially if you hold a significant percentage of the company. Since you mentioned you're just one employee among many, this probably won't apply to you, but it's worth confirming with a Brazilian tax advisor who specializes in international equity compensation. Regarding AMT and the 83(b) election for non-residents - it's generally more attractive because it can help you avoid AMT on the spread at exercise. Without the election, if your company's value has grown significantly by the time you exercise, that entire spread gets hit with AMT. With the 83(b) election, you're taxed on the much smaller spread at grant (often zero for early-stage startups), then only pay capital gains rates on the appreciation when you sell. For non-residents, this is usually beneficial because you're likely only subject to US tax on the capital gains when you actually sell the shares, and the rates are generally more favorable than ordinary income rates. Just make sure to coordinate with Brazilian tax planning since you'll need to report this income there too!