Thanks for bringing this up! My company actually did mention "early exercise" as an option but I didn't really understand what it meant or why I would do it. Is there any advantage to exercising early before the options vest? And what exactly is an 83(b) election?

The main advantage of early exercise is potential tax savings. When you exercise options, you're taxed on the difference between the exercise price and the fair market value at the time of exercise. By exercising early when the company valuation is still low, that difference might be small or even zero, minimizing your tax hit. An 83(b) election is a form you file with the IRS within 30 days of exercising unvested options. It tells the IRS you want to be taxed on the shares at the time of exercise rather than when they vest later. This is crucial because without it, you'd be taxed again at each vesting date based on the potentially higher fair market value at that time. The 83(b) essentially locks in your tax obligation at the lower early value. It's especially valuable for startup employees who expect the company's value to increase significantly over time.

Do you know if there's any specific form or documentation we should ask the company for regarding the 409A valuation? My startup is pretty disorganized with this stuff.

You can request a tax transcript though right? Even if they haven't fully processed it?

Unfortunately, the transcript isn't available until they've processed your return, which is exactly the problem. You can get transcripts from previous years, but not for a return that's still sitting in their paper backlog. My mortgage lender ended up needing additional documentation and it delayed my closing by almost a month. Just wanted to mention it in case you might need proof of filing for anything important this year.

What about component depreciation or cost segregation studies? I've heard those can front-load even more depreciation. Are those worth doing for a small investor with just 1-2 properties, or are they only worthwhile for larger portfolios?

Cost segregation studies absolutely can be worth it even for small investors with 1-2 properties, especially for properties with higher improvement values (like $300K+ in building value). These studies typically identify 20-30% of a building's components that can be depreciated over 5, 7, or 15 years instead of 27.5 years. The sweet spot is usually properties purchased in the last 1-3 years with significant improvement value. The studies themselves typically cost $3,000-$7,000 depending on property size and complexity, but can generate tax savings of $15,000-$50,000 in the first year for many properties. Just make sure you work with a reputable firm that has experience defending their studies in IRS audits if needed.

Yes, you still have to pay depreciation recapture even if you sell at an overall loss. The IRS treats the depreciation recapture as a separate calculation from your capital gain/loss. So you could have a capital loss on the sale but still owe depreciation recapture tax on all the depreciation you claimed (or should have claimed) during ownership. It's one of the nastier surprises in real estate taxation.

That's a great suggestion! Is there anything specific I would need to bring to the appointment besides my last paystub? Would I need to bring a partially completed 4852 form too?

Definitely bring your ID, Social Security card, last paystub, and any communication you've had with your employer about the missing W-2. It's helpful to bring a partially completed Form 4852 too, but not required - they can help you fill it out from scratch if needed. Also bring your previous year's tax return if you have it, as this helps them verify your identity. And if you've already started working on this year's return, bring that draft too. The more documentation you have, the smoother the appointment will go!

I used Form 4852 last year and had zero issues. Got my refund in about 3 weeks. Just make sure your numbers are as accurate as possible from your last paystub. The main thing IRS looks for is if your reported income matches what your employer eventually reports to them.

Do you think it's better to mail the response or use the online response option mentioned in some CP2000 notices? I'm worried about documents getting lost in the mail but also wonder if the online system properly handles all the attachments I need to send.

I'd recommend using both methods if possible. The online response system is convenient, but in my experience, it has limitations with the number and size of attachments you can upload. What I did was submit the basic response online and noted that additional supporting documentation was being sent by certified mail. When you mail physical documents, always use certified mail with return receipt requested. This gives you proof that they received your package and when. For online submissions, take screenshots of your confirmation page and save any confirmation emails or numbers they provide.

I recommend addressing them as separate issues in your response for clarity. First, explain the brokerage transfer and provide documentation showing the correct cost basis for those securities. Then separately address the wash sale transactions, acknowledging those were legitimate but explaining how they affected your overall gains/losses.