15 What if the contractors already filed their taxes using the 1099 information I gave them directly? Does that reduce the chance of penalties since the income was properly reported?

4 That's definitely a point in your favor. If the contractors reported the income correctly on their returns, the IRS got the tax revenue they were due. The purpose of the 1099 system is ultimately to ensure income gets reported. However, technically the filing requirement is separate from whether the income was reported correctly. The IRS wants the official forms filed on time regardless. But practically speaking, if there was no tax loss to the government because your contractors properly reported their income, the IRS has less incentive to pursue penalties.

1 Thanks for the tip! Just set reminders in my phone and calendar. Do you know if Wave accounting has this capability too? That's what I'm currently using to track everything.

19 Wave does have 1099 preparation but last I checked you have to pay extra for the e-filing option. It's like $20 per contractor or something, which might be worth it to avoid the hassle. I switched to QB last year specifically for better tax document handling.

How do you manually adjust cost basis? I think I might be in this exact situation but I have no idea how to fix it. My broker's website is confusing and when I called customer service they weren't helpful at all.

Most brokerages have a section where you can adjust or enter cost basis information for your holdings. Look for something like "Update Cost Basis" or "Adjusted Cost Basis" in your account settings or portfolio section. You'll typically need to enter the acquisition date and price per share from your vesting documentation. If you can't find it online, call your broker again but specifically ask for their "cost basis department" - regular customer service reps often don't know how to handle these adjustments. Have your vesting statements ready showing the FMV (fair market value) on your vesting dates. If they're still not helpful, you can report the correct basis directly on your tax return using Schedule D and Form 8949, making sure to check the box indicating that the basis reported to the IRS was incorrect.

Exactly right. I recommend people make estimated tax payments each quarter after significant vestings to avoid penalties too. I messed this up one year and got hit with underpayment penalties on top of the extra tax!

Do you know how long we need to keep these records? I've been holding onto all my tax stuff for like 7 years and it's getting to be a lot of paperwork.

The general rule is to keep tax records for at least 3 years from the date you filed your return, since that's typically how far back the IRS can go for audits. However, if you underreport your income by more than 25%, they can go back 6 years. And if they suspect fraud, there's no time limit. To be safe, I personally keep everything for 7 years, but I've started scanning all my documents and keeping digital copies instead of paper. Way easier to manage and search if you ever need something specific. Just make sure you keep backup copies of your digital files!

Yes! This happened to me in 2023. Robinhood initially reported $42 in qualified dividends, but when I added up my monthly statements it was actually $56. They ended up issuing a corrected 1099, but it came so late I had already filed. Had to do an amended return which was such a pain with paper filing.

Do you know if these exceptions apply automatically, or do you have to fill out a special form? I used some of my withdrawal for medical expenses but I'm not sure how to claim that exception.

The exceptions don't apply automatically - you need to report them correctly on your tax return. For medical expenses, you'll need to file Form 5329 along with your tax return. On that form, you'll enter the early distribution amount, then enter the portion that qualifies for the medical expense exception using the appropriate exception code. Keep in mind that only unreimbursed medical expenses exceeding 7.5% of your adjusted gross income qualify. So if your AGI is $50,000, only medical expenses above $3,750 would potentially qualify for the exception. Make sure to keep all documentation of your medical expenses in case of an audit - receipts, insurance statements, anything showing these were legitimate medical costs.

I got mine from Fidelity in late January, but Vanguard didn't send mine until February 10th. They're required to mail them by January 31st, but that doesn't mean they'll arrive right away. You could check if yours is available electronically - might be faster than waiting for mail.

I don't think this is accurate. The IRS doesn't proactively send you your tax information just because you have direct deposit set up. You might be thinking of something else? Maybe tax return transcripts that you specifically requested?

You know what, you're absolutely right and I was confusing two different things. What actually happened was I had requested my tax transcripts online and selected to have them mailed, then forgot about it. They came months later after I'd moved but were forwarded to my new address. The direct deposit thing was completely unrelated. Thanks for the correction!

The Get Transcript tool is actually pretty comprehensive! It shows all the W2s and 1099s that have been reported to the IRS under your SSN. The only real limitation is that sometimes there's a delay in when information appears - if an employer just recently submitted your W2, it might not show up immediately. Also, while it shows the federal tax information, it might not have complete state tax details, so if you need that for state returns, you might need to contact your state tax department separately.