Thanks for explaining this! I just checked my W-2 from 2021 and sure enough, there is an amount listed in Box 14 that matches when the RSA vested. So if I understand correctly, I should use that as my cost basis when entering this into TurboTax?

Yes, that amount in Box 14 is exactly what you should use as your cost basis. Enter that into TurboTax when it asks for the adjusted basis. This will reduce your capital gain to just the appreciation that occurred between vesting and acquisition. Regarding the 20% rate, once you enter this correct basis, check your total income. If your modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly), you're subject to the additional 3.8% Net Investment Income Tax on top of the 15% long-term capital gains rate, effectively making it 18.8%, which TurboTax might round to 20%.

I agree with this! Same thing happened to me last year and I ended up amending my return after I realized I'd overpaid. The adjustment codes on Form 8949 are crucial for equity compensation.

That's a great idea about the checkbox for credits! I definitely find clients often don't know what they qualify for. How do you handle situations where clients received advance premium tax credits but don't know the amounts? That's a struggle I have every year.

I require clients to bring their 1095-A forms or download them during our meeting. The Marketplace should have sent these forms, but many clients overlook them or don't understand their importance. For clients who received advance premium tax credits but don't know the amounts, I have them create or log into their Healthcare.gov account (or state exchange) during our meeting where they can download their 1095-A immediately. This saves the back-and-forth of having to reschedule because of missing documentation. I also explain that without this form, we can't complete their return accurately, and they could end up owing money back if we guess wrong.

I specifically ask "Did you buy, sell, receive as payment, or exchange any virtual currency (including Bitcoin, Ethereum, NFTs, etc.)?" and then give examples: "This includes using crypto to buy things, converting between different cryptocurrencies, receiving it as payment for goods/services, or mining/staking rewards." The examples seem to jog their memory better than just asking about "cryptocurrency transactions.

Do you have a template for that spreadsheet you could share? I'm about to close on my first rental property next month.

I don't have a shareable template, but it's pretty simple to create. I made columns for the asset description, date placed in service, total cost, recovery period (27.5 years for building, 5-15 years for other items depending on what they are), method (straight-line for building), and then a column for each tax year showing the depreciation amount. I recommend setting it up early and updating it whenever you make improvements. This way when you get to that "carryover" question next year, you'll have all the information readily available. Plus if you ever get audited, having this detailed record will make your life much easier.

Cost segregation can be very beneficial but typically makes the most financial sense for properties valued over $500,000. The study itself can cost $5,000-$15,000 depending on the property. For a $275,000 property like the original poster mentioned, the cost might outweigh the benefits unless there are very specific high-value components that could be separated. A simpler approach is to just separately track and depreciate obvious non-structural components like appliances, carpet, etc., using their appropriate class lives without doing a formal cost segregation study.

Does that also work for returned excess Roth IRA contributions? I contributed too much last year and my provider sent me a check, but I'm not sure if it's handled the same way since Roth contributions are post-tax.

For excess Roth IRA contributions that are returned, you generally don't report the principal amount as income (since you already paid tax on it), but you do need to report any earnings on that excess contribution as income in the year you receive the distribution. When you get the distribution, your IRA provider should send you a 1099-R that breaks down how much was principal and how much was earnings. In TurboTax, you'll enter the 1099-R and indicate it was a returned excess contribution, and it should handle the calculations correctly.

I switched to H&R Block online last year after 5 years with TurboTax. Their interface is slightly less polished but I found their help resources more accurate. The big difference was when I called their support line - I got someone who actually knew what they were talking about and gave me a clear answer about how to handle a 1099-MISC for a one-time consulting gig.

We actually checked their credit report last week and there's nothing on it about tax liens. Does that mean the debt might be too old to collect? They haven't had any credit cards or loans during this period either, so the report is basically empty.

That's actually a potentially good sign. The IRS stopped putting tax liens on credit reports for the most part after 2018, but if this debt was active and being pursued aggressively before then, you might have expected to see something. The empty credit report aligns with their "off the grid" lifestyle, which ironically might have worked in their favor regarding the statute of limitations. However, this is still not conclusive evidence - they need to get their tax transcripts to know for certain what debts might still be collectible.

This isn't entirely accurate. If they haven't filed returns for those years, they won't meet the "return filed at least 2 years ago" requirement. The IRS also sometimes files "Substitute for Returns" which don't count as taxpayer-filed returns for bankruptcy purposes. They would need to file proper returns first.

You're absolutely right about the return filing requirement - I should have been more clear. If your friend hasn't filed returns for those tax years, they would need to file them first and then wait two years before the taxes would be eligible for discharge in bankruptcy. The Substitute for Return point is also important. If the IRS filed these on your friend's behalf, they don't count toward making the tax dischargeable - your friend would need to file their own returns to replace these.