They were NSOs from the beginning. The company was pretty clear about that in all the grant paperwork. Does that change how I should be handling this situation with the potential double taxation?

For NSOs, it's straightforward then. When you exercised, the spread between strike price and fair market value ($53 - $16 = $37 per share) was correctly reported as ordinary income on your W-2. Your cost basis for the shares is the full $53/share (strike price + spread already taxed). When you sold, you should only be taxed on any gains above $53/share. If you sold for less than $53/share, you should actually have a capital loss to report. Check your 1099-B from Schwab. Many brokers don't correctly report the cost basis for option exercises, especially if you transferred the shares from an employee plan. If the 1099-B shows a lower cost basis than $53/share, you need to make that adjustment on your Schedule D when you file.

Not OP but I use TurboTax and have a similar issue with my ESPP shares. Is there a specific form or screen where I should be making these adjustments?

This is super helpful! I hadn't even thought ahead to resolution options yet. Any tips on documentation needed for the Offer in Compromise? I suspect my client will have significant tax debt once we figure out all the unfiled years.

For the OIC, you'll need comprehensive financial documentation - recent bank statements (3 months), pay stubs, vehicle registrations, property records, investment accounts, retirement accounts, credit card statements, loan statements, and monthly expense documentation. The IRS Form 433-A (individual) or 433-B (business) will be required. The key is accurately documenting your client's collection potential. This includes liquid assets, equity in property, and future income potential minus allowable expenses. If your client has few assets and limited income, that strengthens the OIC position. Make sure to fully document any hardship conditions or special circumstances that would justify accepting less than the full amount owed.

Streamlined procedures only apply to international situations with unreported foreign assets/income. If this is purely domestic, it wouldn't qualify. Regular voluntary disclosure through filing the required back returns is the way to go.

I've thought about the nonprofit route but honestly it seems overwhelming. Do I need a lawyer to set that up? And would I have to have an actual board of directors with meetings and all that? It's just me running this little gallery out of a converted garage, so it all seems like overkill, but maybe I'm underestimating the benefits?

You don't absolutely need a lawyer, though having one review your paperwork is helpful. There are services that can guide you through the process for much less than attorney fees. And yes, you would need a board of directors - typically minimum 3 people including yourself. They could be friends or family who support your mission. For a small operation like yours, you might consider fiscal sponsorship instead. This is where you operate under an existing nonprofit's umbrella. You'd maintain creative control while they handle the administrative/tax side. Many community arts organizations offer this service for a small percentage fee. This gives you many nonprofit benefits without creating an entire organization structure yourself.

Not a silly question! But unfortunately it's not quite that simple. The IRS looks at the overall pattern and intent, not just whether you charge something nominal. Charging $1 admission that doesn't come close to covering costs might actually reinforce that it's a hobby rather than a genuine profit-seeking business. They look at your overall approach, whether you have business plans, separate accounting, etc. It's more about demonstrating genuine business intent rather than just token income.

But doesn't this mess up your book value in Quickbooks for future years? If you don't depreciate it at all in Quickbooks, won't your financial statements show an asset that should be fully depreciated?

That's a really good point about the book value. In January of the following year (2023), after you've filed your taxes, you should go back to Quickbooks and add a manual depreciation entry that matches what you took on your tax return. This way, your financial statements will reflect the proper book value going forward. Think of it as keeping two separate depreciation tracks - tax depreciation (handled in TurboTax) and book depreciation (which you'll update in Quickbooks after filing). The key is to not have any depreciation in Quickbooks during the import process to avoid duplication.

Is there any chance Congress extends the 100% bonus depreciation? I've heard rumors they might keep it at 100% to help small businesses, but haven't seen anything official.

There's always a possibility that Congress could extend the 100% bonus depreciation, but I wouldn't count on it. While there have been some discussions about extending certain business tax benefits, nothing concrete has been proposed regarding bonus depreciation specifically. The phased reduction (100% to 80% to 60%, etc.) was built into the original Tax Cuts and Jobs Act legislation with the specific intent of gradually reducing the benefit. For planning purposes, it's safer to assume the reduction will continue as scheduled unless you hear official news about an extension. If you have planned asset purchases and can move them up to qualify for the higher percentage, that's the more conservative approach.

I had the same issue! I think Column Tax changed their free tier qualifications this year. I ended up using FreeTaxUSA instead - it was only $15 for state filing and completely free for federal with my moderately complex return.

Thanks for the suggestion! I'll check out FreeTaxUSA. Kinda annoyed at Column Tax for the bait and switch from last year, especially since I had a good experience with their actual product.