Just wanted to add that when you do respond to the CP2000, make sure you respond to EVERY item they're questioning, even if you agree with some parts and disagree with others. I made the mistake of only addressing the items I disagreed with, and it caused more confusion and delays. Also, if you're requesting an extension, do it as early as possible! The closer you get to your deadline, the more stressful it becomes.

Has anyone here ever had their extension request denied? I'm in a similar situation with a CP2000 notice, and I'm worried about what happens if they say no to giving me more time.

Pro tip from someone who handles RSUs regularly: Always keep documentation from each vesting event, especially the fair market value on vesting date. This is your cost basis, and you need it to avoid exactly this situation. I create a spreadsheet each year with columns for: - Vesting date - Number of shares - FMV at vesting - Total value (reported as income on W-2) - Sale date - Sale price - Gain/loss since vesting (this is what goes on Schedule D) This makes tax time so much easier and helps prevent these IRS notices.

Something else to consider - check if your employer offered a "sell-to-cover" option where they automatically sold some shares to cover the tax withholding at vesting. If so, your W-2 already includes the income from the RSUs, and you only need to report any additional gain or loss that occurred between vesting and when you sold the remaining shares. When I had my IRS notice for unreported stock sales, I found out my company had only withheld at 22% for federal taxes, but I was in the 32% bracket, which created additional confusion.

Here's a simple way to think about it - when you select "0" allowances, you're basically telling your employer "take out extra tax just to be safe." Each allowance you claim reduces the amount withheld. Most single people with one job should claim at least 1 allowance to account for the standard deduction (which is $13,850 for 2023). If you claim 0, you're likely overwithholding. But honestly, it depends on your comfort level with tax time. Some people prefer the "forced savings" of overwithholding to get a big refund. Others want their money throughout the year.

Are you getting paid a lot more at this new job compared to your campus jobs? Because tax withholding is based on your projected annual income. If you were making like $15/hr part-time before and now you're making $25/hr full-time, you're in a higher tax bracket so they take out more.

Are you sure you're not actually in a partnership already? The IRS might consider you in a partnership if you're splitting profits regardless of whose name the money comes in under. If that's the case, you should be filing Form 1065 and issuing K-1s, not 1099s.

Don't forget to consider quarterly estimated tax payments! If you're splitting $38k, each making $19k from the content creation, you both likely need to be making quarterly payments to avoid underpayment penalties. This bit me hard my first year!

A word of caution from someone who's been through this - make sure you confirm whether your state tax return has different requirements for reporting these excess contribution earnings! I'm in California, and while I reported the earnings correctly on my federal return as "Other Income" on Schedule 1, I discovered that California wanted it reported differently on my state return. I ended up having to file an amendment because of this. Some states follow the federal treatment, but others have their own rules about how retirement account corrections should be handled. Worth checking your state's department of revenue website or calling them directly to confirm.

One more thing to consider - if you had a loss instead of a gain on your excess contribution (which can happen in down markets), the reporting is slightly different. If your excess contribution actually lost value between when you contributed and when you withdrew it, you unfortunately cannot claim that loss on your tax return when making a same-year correction. You would simply withdraw the reduced amount and report nothing on your tax return. However, if you're correcting a prior year excess contribution and experience a loss, there are specific rules about how you can claim that loss (typically as a miscellaneous itemized deduction subject to the 2% AGI floor - though this is currently suspended through 2025). Just mentioning this for completeness since the market has been volatile!