Thanks for this perspective! I definitely won't go back to H&R Block after that experience. Do you have any tips on finding a good CPA who knows how to handle these interstate moves and stock issues? Is there anything specific I should look for or ask when I'm interviewing them?

Look for a CPA who specializes in individual taxes rather than business taxes. Ask specifically about their experience with interstate moves and stock compensation (RSUs, options, etc). A good question is "how would you handle allocation of income between California and Oregon for a mid-year move?" Also ask about their approach to organizing those old 401ks - a good tax professional thinks beyond just this year's return. Check Google reviews, but also ask for referrals from colleagues in similar situations. Since you work for a large company, there might be others who've dealt with the same stock and relocation issues who can recommend someone.

I'll second FreeTaxUSA. It handled my interstate move and stock sales for $15 (for the state return). Federal filing is completely free regardless of complexity. TurboTax would have charged me $120+ for the same forms.

Thanks for confirming! I felt like I was taking a risk trying a less-known software but it worked perfectly. The interface isn't as pretty as TurboTax but it asks all the right questions and handles the complex scenarios at a fraction of the cost.

That's a really good point. I started contracting around April 2021 and didn't form the S Corp until September. So I definitely had some income before the corporation existed. And yes, I'm pretty sure I filed the 2553 - the bookkeeper handled that paperwork and I signed it. I got something back from the IRS confirming the S election but I'd have to dig through my files to find it.

That's good you filed Form 2553 and have confirmation. Your approach should be to file two different types of returns for 2021 then: For January-August 2021, report your contracting income on Schedule C as a sole proprietor. This will be part of your personal 1040. For September-December 2021, file an 1120-S for your S Corporation. You'll need to report any reasonable salary you should have taken (even if you didn't actually run payroll) and any distributions you took from the business.

I use TurboTax Business for my S Corp. Would that work for someone in OP's situation or is this too complex for DIY software?

Do you have any tips for tracking DeFi staking rewards if you were, hypothetically, completely disorganized and didn't track anything all year? Asking for a friend... 😬

If your "friend" hasn't been tracking anything, there are a few options! First, check if the DeFi protocols you're using have any dashboard that shows historical rewards - some newer ones do offer this. For most cases though, you'll need to use a blockchain explorer like Etherscan, Solscan, etc. Look up your wallet address and filter for the contract addresses of the staking protocols you used. You'll need to go through the transactions and identify the rewards. It's tedious but possible. Some tax tools can also retroactively analyze your on-chain activity and categorize staking rewards automatically. Worth the investment if you have significant DeFi activity, especially across multiple chains or protocols.

How much staking would trigger that self-employment consideration? I'm running 3 Ethereum validators and about 10k in Polkadot. Is that enough to be considered a "business"?

How exactly did you format your response? Did you use any specific IRS forms or just write a letter explaining the situation?

I wrote a formal letter that referenced the notice number and my tax ID at the top. I didn't use a specific IRS form, but made sure my letter was very clear and organized. I started with a direct statement: "I am writing to request abatement of the substantial understatement penalty because all income was properly reported on my original return." Then I included a table showing exactly where each item appeared on my return with line numbers and amounts. I attached highlighted copies of both my filed return and the 1099 forms, with the relevant numbers circled. I find that making it super easy for them to see the evidence increases your chances of success. Don't make them hunt for information or they might just deny your request due to lack of clear documentation.

Most tax software doesn't have great features for handling notices after filing. TurboTax has an "audit support" feature but it's pretty basic - mostly just gives you general guidance. H&R Block offers actual representation if you pay for their Peace of Mind extended service, but that's something you have to purchase when you file, not after you get a notice.

Yes, S-Corps are eligible for the 20% Qualified Business Income deduction. The same income thresholds apply ($170,050 for single filers and $340,100 for joint filers in 2025). Above those thresholds, limitations based on W-2 wages and qualified property start to phase in. Actually, this is where S-Corps can have an advantage over sole props for high earners. Since you're paying yourself a W-2 salary, that can help you qualify for larger QBI deductions if you're over the income threshold. It's a bit complicated but basically your W-2 wages to yourself can help satisfy the wage limitation tests.