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.

Be REALLY careful with tax relief companies! Most of them charge huge fees and promise things they can't deliver. They basically do the same things you can do yourself (set up payment plans, apply for currently not collectible status, or submit an offer in compromise). The IRS has their own programs that don't require paying a middleman. Check out the IRS Fresh Start program before paying some company thousands of dollars for something you could do yourself for free.

Did you have to pay any taxes on those dividends though? I'm confused about whether they count as income for the current year even if you're converting them later.

Do you know if there's a specific place on Schedule C where we should note the 1099-K amount vs our actual total? I'm new to all this and confused about how to show the breakdown.

On Schedule C itself, you just report your total gross receipts on line 1. There's no specific place on Schedule C to break out 1099-K amounts separately. If you're using tax software, it might have a worksheet where you can enter various income sources and 1099 forms, but the Schedule C will show the combined total. Keep your own separate worksheet that reconciles your total income with the 1099-K amounts in case of questions later.

If you're on cash basis (most small sellers are), you report income when received and expenses when paid. So if the return/refund happens in the next year, it would be an expense for that next year, not an offset to the current year's income.

Thanks for being so direct! You're right, I'm definitely not going back to that preparer. Do you have any tips on how to find someone who actually specializes in real estate tax situations? I'm worried about just finding another generic tax person who might not understand these specific issues.

Look for a tax professional who is either a CPA or EA (Enrolled Agent) who specifically lists real estate investors as a client focus. Ask potential preparers how many clients they have with rental properties and LLCs. A good test question is to ask them to explain the differences between Schedule E reporting and S-corporation treatment for rental income - if they can't clearly articulate the pros and cons of each approach for your specific situation, keep looking. I also recommend checking with local real estate investor associations or networking groups - these often have recommended tax pros who serve their members. These professionals typically understand both the tax advantages and pitfalls specifically related to rental properties and real estate investments.

Yes, this happened to me! Got a notice about 8 months after filing saying my 1120S was "filed in error" since they had no record of a valid S-election. They gave me 60 days to either file Form 2553 late (with reasonable cause) or file the correct return type. The lesson I learned is don't wait for their letter - it takes them forever to catch these things, and meanwhile you're continuing to file incorrectly.