This is super helpful! I do have some stock purchases from around 2007-2008 that I'm still holding. Sounds like I should definitely keep those returns. Do you recommend physical copies, digital, or both?

For stock purchases you're still holding, definitely keep those records until at least 7 years after you sell. The basis information is crucial for calculating your eventual capital gains/losses. I strongly recommend both physical and digital copies for your most important documents (like the OIC, home purchase, and investment records). For the rest, properly encrypted digital copies are usually sufficient. Just make sure you have multiple backups - I've seen too many clients lose everything in a hard drive crash. Cloud storage plus an external hard drive gives you good redundancy.

Yes! This happened to me too! Needed info from my 2012 return and the IRS said they couldn't provide a transcript. The IRS representative told me they "might" have the actual return available but I'd need to pay $43 for a copy and wait 6-8 weeks. Definitely keep your own records.

Thanks for mentioning Form 3921! I do have that form and have been keeping it with my tax documents. One question though - when reporting the sale, do I need to reference this form or attach anything special to my return? Or do I just use it to determine my cost basis when filling out Schedule D?

You don't need to attach Form 3921 to your return or reference it specifically. It's primarily for your records to help you accurately report the transaction. You'll use the information from it to determine your cost basis when filling out Schedule D. When you sell, your brokerage will report the sale on Form 1099-B, but often they don't have your correct cost basis for ISO shares, so you may need to make an adjustment. That's where your Form 3921 comes in handy - it has the correct information for your cost basis (what you paid when exercising).

I used TurboTax Premier last year for my ISO sales and it worked fine. There's a specific section for stock options and it walks you through the process. Just make sure you have all your documentation ready (exercise price, date of exercise, sale price, etc). The key is entering the correct cost basis.

I hadn't even thought about that! Did you end up owing money back on those subsidies? Were you still better off filing jointly even with having to repay some benefits?

Yes, we did have to repay about $780 of premium tax credits that my wife had received based on her individual income. However, we still came out about $1,450 ahead overall by filing jointly due to the lower tax brackets, student loan interest deduction, and a higher standard deduction. It's definitely worth doing the math both ways before amending. In most cases, MFJ is better financially, but there are situations where the loss of income-based benefits can offset the tax advantages. I used a tax calculator to compare both scenarios before submitting our amendment.

Unfortunately amendments changing filing status from single to MFJ still need to be paper filed in most cases. I worked as a tax preparer and we had to paper file all of these types of amendments last year. The IRS is slowly expanding what can be e-filed for amendments, but filing status changes especially when adding a whole new person to the return typically require paper filing.

That's actually a really good point I hadn't considered. I did have some payments that crossed over between December 2021 and January 2022, so maybe that's causing confusion. I'll definitely double check the dates on all the 1099s. Do you remember what form you used to explain this to the IRS?

I wrote a simple letter explaining the date discrepancy and included copies of both the 1099 forms with the dates highlighted and a copy of my bank statements showing when I actually received the payments. I also included a copy of the page from my 2022 return where I did properly report that income. The key is to be super clear and provide documentation that makes it easy for them to verify your explanation. I sent it all certified mail so I had proof of when I responded.

Not OP, but this happened to me too! They lost Schedule C from my paper return and then hit me with a huge bill for unreported business income. Took months to resolve. Always e-file if you possibly can!

I e-filed through TurboTax, so I don't think that's the issue in my case. But that's scary they're still having problems with paper returns from years ago. Did you eventually get your situation resolved without having to pay?

Interesting approach! Approximately what percentage of your annual earnings were you able to shift this way? And did you face any challenges with the IRS regarding the size of the contributions relative to employee compensation?

We were able to shift around 15-20% of our annual earnings through the defined benefit plan. The exact amount depends on factors like age, compensation levels, and retirement age assumptions, but it made a meaningful difference in our accumulated earnings position. We haven't faced IRS challenges because we worked with an actuary to ensure our contributions were justifiable based on legitimate factors like age and compensation. The key is ensuring the plan is properly designed as a genuine retirement vehicle, not just a tax avoidance mechanism. Having multiple real employees (not just family members) participating in the plan also helps demonstrate its legitimacy.

I strongly advise against offshore structures for avoiding PHC or AET taxes. The IRS has extremely robust anti-avoidance rules for foreign corporations owned by US persons. You'll trigger Controlled Foreign Corporation (CFC) rules, GILTI (Global Intangible Low-Taxed Income) taxes, PFIC (Passive Foreign Investment Company) regulations, and face extensive foreign reporting requirements with massive penalties for non-compliance. The compliance costs alone would likely exceed any theoretical tax benefits, and aggressive offshore structures specifically designed for tax avoidance could trigger significant penalties or even criminal charges.