Thanks for bringing up Form 4852! I actually didn't know about that option. So if I use my last pay stub to fill out this form, do I need to do anything special when filing my taxes? Like do I need to mail my return instead of e-filing?

You might need to mail in your return instead of e-filing if you're including Form 4852. Some tax software allows you to e-file with this form, but others don't. We ended up mailing ours to be safe. Also make sure you fill out Section 3 of the form explaining why you're filing a substitute W-2 and what efforts you made to get the original (like your phone calls and emails to the company).

Unfortunately that won't help in this case since they're trying to file 2022 taxes now in 2023/2024. They're already past the extension deadline. They need to file ASAP to minimize penalties.

The W-2 tip doesn't work for SEP IRAs though, right? Since SEP contributions come from the employer, not as employee deductions? At least that's my understanding.

You're absolutely right - I oversimplified and that was incorrect. SEP IRA contributions are employer contributions, so they wouldn't reduce your W-2 Box 1 wages like a 401k would. For self-employed individuals or S-corp owners, SEP contributions would be deducted on your personal tax return (Schedule 1, Line 15) rather than affecting your W-2. This is exactly why the confusion happens so often - the tax treatment isn't as visible and straightforward as with other retirement plans. Thanks for the correction!

Yes, SEP IRAs do qualify for the first-time homebuyer exception, up to $10,000 lifetime limit. You'll still pay income tax on the withdrawal, but no 10% penalty. Just make sure you haven't owned a home in the last 2 years to qualify as a "first-time" buyer by IRS standards.

Thanks for confirming! That's a relief to hear. I haven't owned property in about 5 years so I should qualify under the 2-year rule. Will definitely still have to pay income tax on the withdrawal, but avoiding that 10% penalty makes a huge difference when you're talking about a substantial down payment.

Fired him on the spot? But then you had to find someone new during tax season? How did you even manage that? Most good accountants are completely booked up by March.

This is an important point. A lot of people think any income loss during COVID qualifies, when the form is specifically for days you couldn't work due to very specific reasons. The IRS has been flagging suspicious 7202 claims for audit, so you definitely want to make sure you qualify and have documentation.

Thanks for clarifying! That makes more sense why you're pursuing this. Given your situation, I'd definitely push for including Form 7202. The credits can be substantial. One option not mentioned yet - some tax software programs like TurboTax or H&R Block software allow you to complete Form 7202 yourself. You could potentially use the software just for that form, print it out, and give it to your accountant to incorporate into your return. That's what a friend of mine did when her accountant was being difficult about some rental property deductions.

11 Good point about the tax consequences, but isn't there a way to avoid some of these issues? I thought I read something about a post-termination transition period where you can still distribute AAA balances tax-free?

4 Yes, that's correct. After S corporation status ends, there is a post-termination transition period (generally 1 year after the last day of the last S corporation tax year) where shareholders can still receive distributions from the former S corporation's AAA tax-free to the extent of their stock basis. This can be really important for planning purposes. Some shareholders mistakenly believe all their distribution options end when S status is revoked, but this transition period provides a window to distribute accumulated S corporation earnings without dividend treatment under C corporation rules.

14 I dealt with something similar and we ended up going this route. The key was proving that we never operated as an S corp (no distributions, no K-1s issued, etc.) and that it was an honest mistake in the election. Saved us from having to do the split-year filings.

This is super helpful! I just tried it and found my +4 digits. Apparently my apartment building has its own +4 code. Thanks for sharing this!

You're welcome! Yeah, it's interesting how specific the +4 codes can be. Large apartment buildings, office complexes, and even some big companies have their own dedicated +4 codes. It helps mail carriers organize their routes more efficiently, but most people never need to know their +4 for everyday life.