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Something nobody's mentioned yet - make sure you check the updated requirements for the EV tax credit. There are new restrictions based on vehicle price, where it was manufactured, and battery component sourcing. For example, if your Tesla Model Y is over $80k, it might not qualify anyway, and the rules changed in 2023 and again in 2024. Also, if you already took delivery, you should have received a certificate from Tesla confirming the vehicle's eligibility. That's now required documentation regardless of the LLC situation.
Thanks for bringing this up! My Model Y was $58,500 and I did receive the certificate from Tesla confirming it meets the North American assembly requirements. I also checked and the battery components meet the new criteria as well. I was more concerned about the ownership transition issue since the IRS seems pretty strict about documentation. Sounds like I need to keep all paperwork showing the transition from LLC to personal ownership, plus the dissolution documents for the LLC.
That's great! You're definitely under the $80k limit for SUVs, and having that certificate is crucial. Just make sure when you file that you include Form 8936 (Qualified Plug-in Electric Drive Motor Vehicle Credit) with your personal tax return. One more tip - if your income is over $300,000 (joint) or $150,000 (single), the credit starts to phase out. But based on your situation, it sounds like you should be eligible for the full $7,500 as long as you document the ownership transition properly.
Don't forget you also have the option to take the credit at point of sale starting this year rather than waiting for tax time! If you already purchased without doing this, it's too late now, but for anyone else reading this thread, it's something to consider for future EV purchases.
Just an additional tip - when you send your response to the CP 2000, make sure to include Form 1040-X (Amended Return) if you're changing anything on your original return. I learned this the hard way when my first response got rejected because I just sent a letter explaining the changes without the official form. Also, keep copies of EVERYTHING you send, and if possible, send your response via certified mail so you have proof of delivery. The IRS has been known to "lose" documentation.
Do you need to send Form 1040-X even if you're just providing documentation but not actually changing any numbers on your return? My CP 2000 is just asking for proof of a deduction I already claimed.
If you're not changing any numbers and just providing supporting documentation for what you already claimed, you typically don't need to submit Form 1040-X. Just include a clear explanation letter referencing your CP 2000 notice number along with your documentation. However, you should still use the response form that came with your CP 2000 notice to indicate whether you agree or disagree with their findings. That form is crucial for proper processing.
Has anyone had success with requesting a payment plan through the CP 2000 response? I got hit with a similar notice and owe around $3000, but there's no way I can pay that all at once right now.
Yes! I just went through this. When you respond to the CP 2000, there's usually a payment options section on the response form. You can check the box indicating you can't pay in full. Once they process your response and send the final bill, you can set up an installment agreement online through the IRS website for balances under $50,000. I set mine up for $100/month and it was super easy to do online. Just make sure you actually set it up once you get the final bill - don't ignore it or they'll start collections.
This is probably an unpopular opinion, but I think actually doing your taxes is the best simulator. I just use the free fillable forms on the IRS website and follow the instructions. If you mess up, the system usually catches calculation errors. My strategy: I do a "practice run" of my taxes in January before all my official forms arrive, using my best estimates. Then when I get all my real documents, I do the official version. The practice run helps me understand what deductions I should be looking for and how different scenarios might play out.
But doesn't that risk submitting incorrect information to the IRS if you make a mistake? I'd be terrified of accidentally committing tax fraud or something.
Has anyone tried UnderstandTax app? My friend recommended it - supposedly it has mini-games that teach you different aspects of tax code. One game has you sort expenses into deductible vs non-deductible piles for different scenarios (W2 employee vs 1099 contractor). Another has you calculate tax liability based on different inputs. I haven't tried it myself yet but I'm thinking about downloading it. Anyone have experience with it?
I downloaded it last month! It's actually pretty decent. The deduction sorting game helped me understand what I could write off for my side business versus my day job. They also have a tax bracket visualization tool that shows how marginal tax rates actually work (which cleared up so many misconceptions I had). The app isn't super polished but definitely helped me understand some tax concepts better than just reading about them. They have a free version with basic games and a paid version with more complex scenarios.
Regarding your RSU situation - one strategy my wife and I use is to set up a Donor Advised Fund. Since we're also in a high tax bracket with significant RSU income, we donate appreciated shares directly to our DAF instead of cash. This gives us a double tax benefit: a deduction for the full fair market value of the shares and we avoid capital gains tax on the appreciation. You can fund it in high-income years (like when large RSU blocks vest) to bunch your deductions, then distribute the actual charitable gifts over time. This has been more impactful for our tax situation than the backdoor Roth, though we do that too.
This sounds promising! How much paperwork/maintenance is involved with a DAF? And can you recommend any specific providers? I've heard of Fidelity and Schwab having these, but not sure if there are advantages to one over another.
The paperwork is minimal - much easier than setting up a private foundation. It takes about 15-20 minutes to open online, similar to opening a brokerage account. Once it's set up, you just transfer assets in and then make grants to charities whenever you want with a few clicks. I use Fidelity Charitable because that's where my other accounts are, but Schwab and Vanguard are also excellent options. They all have similar fee structures (around 0.6% administrative fee annually plus underlying investment fees). The main difference is minimum initial contribution ($5K for Fidelity, $5K for Schwab, $25K for Vanguard) and minimum grant amounts. I'd go with whoever you already have investment accounts with for simplicity.
Don't forget to check if your spouse's employer offers a mega backdoor Roth option in their 401k plan. This would allow for additional after-tax contributions beyond the standard 401k limit (potentially up to $46,000 more depending on employer plan specifics and other contributions). Those after-tax contributions can then be converted to Roth money. Not all employers offer this, but it's worth checking if they do since your income is high enough to take advantage of it. Would give you much more tax-advantaged space than just the regular backdoor Roth IRA.
Just a quick note on this - the mega backdoor Roth requires specific plan provisions: 1) allowing after-tax contributions (not just Roth), and 2) either in-plan Roth conversions or non-hardship in-service distributions. Many plans don't have both features, especially the second one. Worth calling the 401k administrator to check though!
TillyCombatwarrior
One thing nobody's mentioned yet is that 401k loans typically have origination fees and maintenance fees. Mine charges a $100 setup fee plus $50 annual maintenance for as long as you have the loan. Also, the interest rate may be fixed at prime + 1% or similar, which isn't necessarily a great deal in today's market with high-yield savings accounts paying 4%+.
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Anna Xian
ā¢And don't forget the opportunity cost! I took a 401k loan in 2020 right before the market took off. Missed out on like 30% gains because that money wasn't invested. The "interest" I paid myself was nothing compared to what I would have earned leaving it alone. Still kicking myself over that one.
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TillyCombatwarrior
ā¢That's an excellent point about the timing risk. No one can predict market movements, but removing a chunk of money means you could miss out on significant growth during bull markets. Many financial advisors recommend considering other sources of funds before tapping retirement accounts for exactly this reason. Once you miss a growth period in the market, there's no way to go back and capture those gains later.
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Jungleboo Soletrain
Has anyone dealt with the psychological aspect of seeing your 401k balance drop after taking a loan? I borrowed $20k last year and even though I know it's just a loan that I'm repaying, seeing my retirement account suddenly drop by that amount was more stressful than I expected. Made me second-guess my decision even though the math made sense for my situation.
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Rajan Walker
ā¢I had the opposite experience! Taking a 401k loan to pay off high-interest credit card debt actually reduced my stress significantly. Yes, my 401k balance was lower, but seeing those credit cards at zero balance was worth it. And knowing I was paying the interest to myself instead of Visa made each payment feel like I was moving forward, not just treading water.
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