I got a 1099-MISC one year when i received a $750 checking account bonus from my bank. They specifically told me it was taxable when i signed up. But never got anything for regular credit card rewards tho.

This is terrible advice! You can't just "agree" to misclassify a worker. The IRS rules are clear, and misclassification can result in penalties and back taxes for BOTH parties. The nanny would be responsible for both halves of FICA taxes (self-employment tax) if incorrectly classified as 1099, and the employer could face penalties for improper classification. Documentation showing you knowingly misclassified would make things worse, not better.

You're right that it's not technically correct, but in reality, people make these arrangements all the time for small amounts of household help. I was just suggesting a practical solution given that the nanny is uncooperative and the amount is relatively small. But you make a good point about the potential consequences. If audited, having documentation of knowingly misclassifying would definitely be problematic. So I stand corrected - better to do it by the book and use the suggestions others have provided about filing with "Applied For" in the SSN field.

My neighbor went through this a few years ago. They had a live-in nanny for 5 years and never filed the proper paperwork. They got audited for something completely unrelated, but once the IRS started digging, they discovered the household employee situation. They ended up owing around $25,000 in back taxes, penalties, and interest. It was a nightmare for them.

Thanks for mentioning Form 3921. Will this form show the AMT adjustment amount or do we need to calculate that ourselves? Our state (California) doesn't have different rates for capital gains vs regular income, but I'm still trying to maximize the federal tax benefits and use up those carryover losses if possible.

Form 3921 won't calculate the AMT adjustment for you - it just provides the information you need to do that calculation yourself (or that your tax software will use). The form shows the exercise price, fair market value at exercise, and date information you need. California is indeed one of those states that taxes all income at the same rates regardless of whether it's capital gains or ordinary income. But given your federal carryover losses, it's worth talking to a tax professional about timing. Even though the ISO exercise+immediate sale would be ordinary income, there might be other strategies to utilize those capital loss carryovers in the same tax year.

TurboTax can handle basic ISO scenarios, but honestly, if you're dealing with a significant amount (sounds like you are), I'd go with a CPA who specializes in equity compensation. I made the mistake of using TurboTax last year and missed an AMT credit carryforward that cost me about $3,400. A good CPA will save you more than they cost.

What's the difference between an EA and a CPA? Is one better than the other for tax issues?

An EA (Enrolled Agent) specializes exclusively in taxes and is licensed directly by the IRS, while CPAs have a broader accounting background and are licensed by states. For pure tax issues, especially back taxes and IRS problems, EAs often have more specialized experience and can be more affordable. CPAs are great for complex financial situations where you need broader accounting expertise along with tax knowledge. Neither is inherently "better" - it depends on your specific needs. For straightforward back tax filing and IRS negotiations, an EA is usually sufficient and cost-effective. For business owners or people with complex investments and financial planning needs, a CPA might be worth the higher cost.

Fresh Start isn't actually a program you apply for - it's a set of policies the IRS implemented to make it easier for taxpayers to resolve tax debts. It includes expanded installment agreements, easier Offer in Compromise qualifications, and some tax lien relief. The main benefits: you can now get installment agreements with simplified procedures if you owe up to $50K (used to be much lower), and they made it easier to qualify for Offers in Compromise by changing how they calculate your ability to pay. You don't apply for "Fresh Start" specifically - you just take advantage of these more flexible options.

Thank you for sharing your expertise! Is the 30-day appeal window strict or is there any flexibility? The notice arrived about 2 weeks ago, so we're getting close to that deadline.

The 30-day window is fairly strict, but I'd recommend filing the appeal request even if you're close to the deadline. Use Form 12203 (Request for Appeals Review) and send it via certified mail so you have proof of the date it was submitted. If you're very close to the deadline, you can also call the IRS (using whatever method works to get through) and request a brief extension to file the appeal. Sometimes they'll grant a 15-day extension, especially if you explain that you're gathering documentation and seeking professional assistance. Make sure to document who you spoke with and when. The main thing is to get something formal submitted before the deadline, even if your documentation isn't complete yet. You can supplement the appeal later with additional information.

This!! Property valuation is HUGE for gift tax purposes. We had a similar issue and hiring an independent appraiser who specialized in retrospective valuations (valuing the property as of the date of the gift) saved us thousands. The IRS will often accept a professional appraisal if it's well-documented.