Would a cashless exercise eliminate the possibility of qualifying for long-term capital gains treatment? I'm trying to understand if there's any way to both solve the cash flow problem AND get the better tax treatment.

A standard cashless exercise would indeed eliminate the possibility of getting long-term capital gains treatment because you're selling the shares immediately upon exercise. The entire spread between your strike price and the selling price would be taxed as ordinary income. If you're looking to both solve cash flow issues and potentially get better tax treatment, some companies offer what's called a "partial cashless exercise" where you sell just enough shares to cover your costs and taxes, then hold the rest. Those remaining shares could potentially qualify for long-term capital gains treatment if you hold them long enough.

In my experience working at 3 different startups, the type of option is rarely negotiable. Companies typically have a standard equity plan that applies to everyone at similar levels. NSOs are often used for consultants or non-employees, while employees get ISOs. The tax advantages of ISOs are specifically designed for employees.

Do you know if there are specific forms we need to use for reporting crypto specifically? Or is it just the normal capital gains reporting forms?

For cryptocurrency transactions, you'll use the same forms as other capital assets - primarily Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D (Capital Gains and Losses). There's no special crypto-specific form. On Form 8949, you'll need to list each transaction separately with description, date acquired, date sold, proceeds, cost basis, and gain/loss. Then the totals carry over to Schedule D. Make sure to check the correct box at the top of Form 8949 depending on whether the exchange provided you with a 1099-B and whether the basis was reported to the IRS.

I had a $15k loss in 2023 and carried it forward. You'll use Schedule D and it will calculate how much you can use in the current year (up to $3k against ordinary income if you have no capital gains to offset). The remaining amount carries forward automatically and you'll need to keep track of it for future years. Your tax software should handle the calculations, but keep your previous returns handy since you'll need to know how much loss you're carrying forward each year. Mine took about 5 tax years to fully utilize.

Thanks for sharing your experience! Did you have to file any special forms when you did your taxes to show that you'd corrected the excess contribution? And did Fidelity calculate the earnings for you or did you have to figure that out yourself?

Yes, I had to report the correction on my tax return. Fidelity calculated the earnings for me (it was only about $215 since I caught it pretty quickly). They sent me a 1099-R form showing the distribution coded as "return of excess contributions" which I reported on my taxes. I also had to file Form 8606 to report the non-deductible IRA contribution and conversion. On that form, I only reported the allowable contribution amount ($6,000), not the full amount I originally put in. My tax software (I used TaxAct) had a specific section for handling excess contribution removals, which made the process pretty straightforward once I had the documents from Fidelity.

This is actually incorrect advice that could cause problems. You cannot pre-contribute to an IRA for a future tax year before January 1st of that year. While you can contribute to the previous year until the tax filing deadline, you cannot contribute to a future year early. The only option here is to remove the excess contribution (plus earnings) or face the 6% penalty that applies each year until the excess is removed.

Did you have to do anything special on your return to indicate that you had a 1098-T but weren't claiming the credits for it? I'm worried the IRS might flag something if they see my 1098-T was issued to me but doesn't appear on my return.

You don't need to do anything special on your return regarding the 1098-T. The form is information reported to both you and the IRS, but there's no requirement that you have to claim the associated credits. You simply don't fill out Form 8863 (Education Credits) on your return. The IRS systems understand that dependents' education expenses are claimed by the person claiming them as a dependent. As long as you check the box on your return that you can be claimed as a dependent on someone else's return, the systems know to look for those education credits on your parents' return, not yours.

That happened to me too! It delayed both my refund and my parents' refund by months while the IRS sorted it out. They had to submit additional documentation and I had to file an amended return. Total nightmare.

Exactly! And the worst part was that nobody got the education credit in the end because of the way the paperwork had to be corrected. The IRS made us file specific forms to resolve the conflict, and by the time everything was sorted out, we'd missed some deadline for claiming the full credit amount. Make sure your parents know not to file their taxes without including your 1098-T information!

Thanks for the insight! I did keep copies of everything and took photos of the completed forms before mailing them. About the address - that's actually a concern. I might be moving to a different apartment in August. Should I submit a change of address form with the IRS now, or wait until closer to my move date?

I recommend waiting until about 2-3 weeks before your move to submit Form 8822 (Change of Address) to the IRS. If you do it too early, they might start sending mail to your new address before you're there. Make sure you also submit a change of address with USPS, as they can forward your mail for up to 12 months. This gives you double protection against missing important IRS notices. And don't forget to update your address with your school's international student office as well, since they handle your tax documentation for visa purposes.

Not all states have income tax though. And for nonresident aliens, state tax filing requirements vary widely depending on which state they live in. Some states don't require nonresidents on F-1 visas to file at all if their only income is from a qualified scholarship.