Thanks for mentioning this! The bonus and repayment did happen in different tax years - I got the bonus late last year and repaid it early this year. I'll definitely look into the Section 1341 relief. Is this something I need to specifically ask for, or will the tax software calculate which option is better for me once I enter the information?

The tax software should calculate which option is better for you, but sometimes you need to make sure you're entering the information in the right place. In H&R Block, search for "claim of right" or "income repayment" and it should guide you through the process. The software will compare the benefit of taking the deduction versus the credit and should automatically use whichever gives you the better result. Just make sure you have last year's tax return handy because you'll need information from it to properly calculate the Section 1341 credit.

I used TurboTax for a similar situation last year. You need to go to Deductions & Credits > Other Tax Deductions and Credits > Other Deductible Expenses. Then there should be an option for "Repayment of previously reported income." Just make sure you have the exact amount you repaid and documentation to support it.

Thanks! That's exactly what I needed. I've been searching through all the menus and couldn't find it. Hopefully this will save me the $12k difference the original poster mentioned.

Is this actually legal though? I thought you had to use the exact W2 information or get official transcripts from the IRS.

It's absolutely legal to file with your best available information. The IRS would much rather have you file with reconstructed information than not file at all. You should make a good faith effort to get the correct documents first, but if that's not possible, you have to work with what you have. Just be sure to note on your return that you're using estimated information based on available records. The IRS can always correct it later if there are significant discrepancies, but at least you've fulfilled your filing obligation and stopped the failure-to-file penalties from growing.

Are you sure about this? I thought the 3-year limit was from when you actually file, not the original due date. Is this different for different tax situations?

I'm 100% certain it's 3 years from the original due date, not from when you file. This is a common misconception. This is straight from the IRS: you must file your claim for a credit or refund within 3 years from the date you filed your original return or within 2 years from the date you paid the tax, whichever is later. So for a 2021 tax return that was due in April 2022, you have until April 2025 to claim any refund. After that, even if you were owed money, it becomes the property of the U.S. Treasury. The IRS is strict about this timeline and doesn't make exceptions. That's why filing sooner rather than later is so important, especially if you think you might be owed money!

I'm honestly not even sure if I paid AMT when I exercised these. How would I know? Would it have been obvious on my 2023 return or is this something that could have happened without me realizing it?

Check your 2023 tax return for Form 6251 (Alternative Minimum Tax). If you paid AMT, it would show up there and on line 1 of Schedule 2 of your Form 1040. If you did pay AMT in 2023 when you exercised, you'll likely be eligible for an AMT credit on your 2025 return (for the 2024 tax year when you sold). You'll need to file Form 8801 (Credit for Prior Year Minimum Tax) along with your return. This credit can potentially offset some of the tax impact from your disqualifying disposition.

Yep, this happened at my last job too. But be careful - some companies mess up the reporting on disqualifying dispositions. My employer reported the wrong amount on my W-2 (they used the sale price instead of FMV at exercise for calculating the ordinary income). Had to get an amended W-2 which was a huge hassle. Double-check your W-2 when you get it!

17 Is that also true if you're leasing the car? My tax software is asking for all this info but I don't own my vehicle.

3 For leased vehicles, it works differently. You generally can't claim depreciation or Section 179 on a leased vehicle because you don't own it. Instead, you can deduct the business portion of your lease payments as a business expense. You still need to track your business vs. personal use percentage, but you'll apply that percentage to your lease payments rather than calculating depreciation. The "date placed in service" would still be when you first started using the leased vehicle for business purposes, but it's used differently in your tax calculations.

2 I use Stride. It's free and automatically tracks your miles while you drive. You can categorize trips as business or personal, and it calculates your potential tax deduction based on the current IRS mileage rate. It also lets you track other expenses like car washes, phone bills, etc. Been using it for 2 years now and it makes tax time way easier.

But couldn't the IRS flag your return as incomplete if the employer already reported those wages? I always heard they match all W-2s to returns and send notices if something's missing.

Yes, the IRS does match reported income from employers against what you report on your return. If there's a discrepancy, you might receive a CP2000 notice proposing additional tax based on the unreported income. For very small amounts, the tax difference might be minor, but you'd still have to deal with responding to the notice and potentially paying interest on the unpaid amount. That's why it's generally best to report everything properly the first time using Form 4852 if you can't get the W-2, even for small amounts.

I actually tried that first! The manager said all W-2s are handled through their corporate system and she literally couldn't access them at the store level. She gave me the corporate number which led to the endless runaround I mentioned. Seems like their system isn't set up well for these edge cases like super short employment.

This happened to me years ago with a retail job. The store manager actually had me talk to their payroll person directly and they emailed me a copy within an hour. Definitely worth trying the local route first before going through all the IRS processes!