I bought a Toyota RAV4 Prime PHEV. When I purchased it, the dealer specifically mentioned it qualified for the federal tax credit, and my tax software (TurboTax) confirmed it qualified based on the info I entered. That's why I'm so confused about the rejection based on VIN - everything else seems to match up with eligibility.

That explains it! Toyota hit their 200,000 vehicle limit for the full credit back in 2021, which triggered the phase-out period. If you purchased your RAV4 Prime in 2023, you were likely in the final phase-out period where the credit was significantly reduced or possibly eliminated completely. What probably happened is that your tax software may not have been updated with the latest phase-out information, or there was a miscommunication about which tax year's rules applied to your purchase. The VIN rejection might actually be the IRS's system recognizing that your particular vehicle doesn't qualify for the credit amount you claimed. I recommend checking the exact date Toyota hit their limit and calculating where your purchase falls in the phase-out timeline. This specific information would be crucial for your appeal.

I used the Taxpayer Advocate Service last year when I had an issue with a rejected education credit. They were actually really helpful! You need to fill out Form 911 (yes that's really what it's called lol) to request their help. They assigned someone to my case who actually called me back and helped resolve the issue in about 3 weeks.

That's a really interesting point about tax credits! I don't think we've explored that angle. He pays child support but doesn't have custody, so I'm not sure what credits might apply in his situation. Are there specific ones you know of that might help? And good point about the Roth 401k - I'm pretty sure he's in the traditional one but I'll definitely mention that option to him.

If he pays child support, he should look into whether he qualifies for the noncustodial parent earned income credit in his state (some states offer this). While he won't qualify for the federal EIC without claiming the child, he might be eligible for other adjustments. For the 401k, Traditional reduces his taxable income now but taxes later, while Roth is taxed now but tax-free later. If he's in a lower tax bracket now than he expects to be in retirement, Roth often makes more sense. Either way, remind him that his 401k contribution percentage might need to be adjusted if he switches types to maintain the same take-home pay.

The IRS calculator is definitely hit or miss. It works okay for people with very standard situations (one job, no deductions beyond standard, no credits) but fails for anything remotely complex. I've had better luck with some of the calculators built into tax software like TurboTax's W4 helper, but even those aren't perfect.

Yes, they did put it in box 14 with "ISO-DQ" next to the amount! The supplemental statement they gave me breaks down the bargain element that was included in my W2 income. The confusing part has been figuring out exactly where to enter this in TurboTax to avoid the double counting.

Perfect! That ISO-DQ code is exactly what you need. When you enter your stock sale in TurboTax, there should be a section where you can adjust your cost basis. You'll want to add the amount listed next to "ISO-DQ" in box 14 to your original purchase price of the shares. For example, if you originally paid $2,000 for the shares, and the ISO-DQ amount is $5,000, your adjusted basis would be $7,000. This ensures you're only taxed on the actual gain from purchase to final sale, not including the amount already taxed as ordinary income.

Free File options usually don't handle complicated stock transactions very well. I tried using Free File Fillable Forms last year for my ISO situation and ended up switching to a paid version of TaxAct because it was too confusing.

7 Did they send you any kind of notification when the IRS actually accepted it? Or just confirmation that you submitted?

21 Yes, they sent two emails. The first was immediate confirmation that my form was submitted through their system. The second email came about 24 hours later confirming the IRS had accepted my extension. They also had a status tracker on their website where I could log in and check if anything had changed.

11 Not all tax software includes Form 7004 in their basic packages though. I tried using TaxAct last year and discovered I needed to upgrade to their business package just to file an extension, which was like $70+ more than I wanted to spend just for the extension form.

That's interesting, I've never heard of "statutory employee" before. I'll definitely check box 13 when I get my W-2. Do you know if cable/internet installers typically fall into this category? The job involves driving to different houses throughout the day to install equipment.

Cable/internet installers can sometimes qualify as statutory employees, especially if you're paid on commission or job completion rather than hourly, and if you're responsible for your own expenses. The key factors are usually: 1) you personally provide the service, 2) you don't have a substantial investment in equipment, 3) you have a continuing relationship with the company, and 4) you don't have significant profit/loss risk. If box 13 is checked, TurboTax will walk you through a Schedule C where you can deduct all those gas receipts and tools. Just make sure you're tracking mileage as well as receipts - the standard mileage deduction is often better than actual gas expenses.

This is actually really good advice. I did the same thing. Paid a CPA about $300 the first year I had contractor income, then just copied the format in TurboTax the next year. Saved me so much stress about doing it wrong!