Would you recommend attaching some kind of profit projection or business plan to my return? I did have one when I started, showing how I planned to monetize once I hit certain view thresholds. Just wasn't sure if that would help or draw more attention to the loss.

I wouldn't attach the full business plan to your return as that might actually draw unnecessary attention. Instead, keep it with your tax records in case of an audit. What can be helpful is a brief statement with your return explaining the nature of your business, that you operated with an intent to profit, and mentioning that you have documentation of your business plan and efforts. This shows you're aware of the requirements without overwhelming the initial filing with extra documents.

This is actually a common misconception. Schedule C losses don't reduce your Social Security wages from W2 employment. Your W2 income is still fully reported for Social Security purposes regardless of Schedule C losses. The losses might reduce your overall income tax, but your Social Security contributions and credits remain based on your W2 earnings.

This is absolutely correct. I made the mistake of exercising right at our IPO and selling within the year. Ended up paying nearly 45% (combined federal, state, local) in taxes on the full value. A colleague who exercised a year earlier paid ordinary income on the smaller pre-IPO spread, then only 15% on the huge jump from exercise to IPO price. Difference was over $100k in taxes on roughly similar option grants.

That's a really important point about the 409(a) potentially increasing! I hadn't considered that but it makes total sense as we get closer to IPO. I like the idea of a partial exercise strategy. Regarding cashless exercise - I've heard rumors that we'll have that option at IPO, but nothing confirmed in writing. I should probably ask our finance team about this. Would that essentially mean I could exercise and immediately sell enough shares to cover the exercise cost and taxes?

Exactly - a cashless exercise at IPO would let you exercise options and immediately sell enough shares to cover both the exercise cost and the resulting tax bill, without needing to come up with cash out of pocket. Very common for IPOs. If that's an option, you might want to hold some options for that route, especially if you're cash-constrained. The tax hit will be higher, but you won't need liquidity. Many people do a mixed approach - exercise some now for tax advantages (if you have the cash), and save some for cashless exercise at IPO to diversify risk. Definitely get confirmation from your finance team though - some companies require you to exercise before IPO to participate in the offering!

3 Yes, this is related but slightly different. With backdoor Roth, you make a non-deductible Traditional IRA contribution first, then convert it to a Roth. You'll need to file Form 8606 to report the non-deductible contribution. For basis calculation: your basis in the Traditional IRA is what you've contributed after-tax (non-deductible contributions). When you convert to Roth, you'll pay taxes on any earnings plus any pre-tax money in ANY Traditional IRA accounts you have (pro-rata rule).

10 Thanks! I didn't realize I needed to file Form 8606 for the backdoor Roth. And I completely forgot about the pro-rata rule. I have an old Traditional IRA from a 401k rollover that would definitely complicate things.

1 That's really helpful to know! I wonder if I can still call Fidelity now about my 2023 distribution and have them update the coding retroactively? Has anyone tried this?

Thanks for this simple breakdown! So just to confirm - in my case with $10,400 paid, $6,500 deducted, and $1,400 refunded - the refund is completely non-taxable? And would I still get a 1099-G from my state for the refund even though I don't need to report it?

Yes, your $1,400 refund would be completely non-taxable since it's less than the $3,900 difference between what you paid and what you were able to deduct. And yes, you'll still receive a 1099-G from your state because they don't know your specific federal tax situation. You'll need to report it on your federal return, but the tax software or worksheet will help you calculate that the taxable amount is $0. Don't skip reporting it just because the taxable amount is zero - that can trigger a mismatch notice from the IRS.

You'll need to report the state refund on Schedule 1, Line 1. But you should complete the "State and Local Income Tax Refund Worksheet" in the 1040 instructions first to determine how much (if any) is actually taxable. If you're dealing with the SALT cap situation described in this thread, you may well calculate that $0 is taxable, but you still need to work through the worksheet.

Thanks for bringing this up! The letter they gave me does say "donation to support school fundraising activities" and doesn't specifically mention raffle or prize. So I'm guessing that's the right wording? Should I request any additional documentation from them before filing?

That wording sounds perfect! It acknowledges your charitable intent while not specifically tying it to the raffle mechanism. You should be good to go with that documentation. I wouldn't request additional paperwork as that might just complicate things. Just make sure you have your receipts showing your costs alongside the donation acknowledgment letter. For business expenses under $250, the documentation requirements aren't as strict, but since your total was $275, having both the letter and receipts provides the complete documentation package you'd need in case of questions.

There's no minimum for business deductions. But honestly for $50, you might spend more time documenting it than it's worth in tax savings. If your tax rate is say 20%, you're talking about saving $10. But if you're already tracking all expenses carefully anyway, might as well include it!