Just to add some additional clarity on the original question - there's another situation that occasionally happens with stock options that wasn't mentioned above. Some companies allow for "early exercise" of unvested options. If your company offers this and you choose to do an early exercise, then yes, there would be tax reporting even though the options haven't vested yet. For NSOs, you'd have the spread (if any) reported on your W2. For ISOs, you might need to track AMT adjustments. Also, don't forget to file an 83(b) election within 30 days if you early exercise! This is super important for tax purposes.

One thing nobody mentioned yet - if your company is private, make sure you understand the 409A valuation process! This determines the "fair market value" used for tax calculations. I got burned last year because I didn't realize our 409A had increased significantly before I exercised my NSOs. Also, keep really good records of everything - grant dates, vesting dates, exercise dates, FMV at each point, etc. If you ever get audited, you'll need to prove all these details.

One practical consideration: if your LLC is taxed as a partnership, remember that partners pay taxes on their allocated profits whether or not those profits are distributed. So if you allocate more profit to the two working partners but everyone takes equal draws, make sure those partners can cover their higher tax bills from other sources. I've seen this cause major cash flow problems for partners who didn't realize they'd be taxed on profits they didn't actually receive in cash. The partner getting a smaller allocation might be happy with the tax savings, but the partners with larger allocations need to be prepared for the higher tax burden.

This is exactly the kind of situation where you need to be extremely careful about the IRS "substantial economic effect" rules. I went through something similar with my LLC a couple years ago and learned the hard way that you can't just shuffle profits around for tax benefits. The key thing the IRS looks at is whether your profit allocation reflects actual economic reality. Since you mention the two working partners already draw salaries, you'd need to justify why they deserve additional profit allocation beyond that compensation. Simply being in lower tax brackets isn't a valid business reason. However, if those two partners are truly contributing more value through unpaid overtime, business development, or taking on additional risk/liability that the third partner doesn't share, you might have grounds for a special allocation. You'd need to document this thoroughly in your operating agreement with specific business justifications. Also consider the cash flow implications - partners pay tax on allocated profits regardless of actual distributions. If you allocate more profits to the working partners but everyone takes equal draws, make sure they can handle the higher tax burden from their other income sources. I'd strongly recommend getting your operating agreement reviewed by a tax attorney who specializes in partnership taxation before making any changes. The penalties for getting this wrong can be severe.

Just a heads up for anyone applying for an ITIN - the process is taking MUCH longer than usual right now. I applied in September and just got my number last week (almost 4 months later!). The IRS website says 7-11 weeks but that seems to be pre-pandemic timing. Plan accordingly if you need your ITIN by a specific date! Also, TRIPLE check your application for errors. My roommate's application was rejected because he didn't check one of the little boxes in section 6d. Such a small error caused a 2-month delay for him.

Rita, I went through this exact same process last year as an international student from India! I was terrified about mailing my passport too. Here's what I learned that might help you: You definitely have options beyond mailing your original passport. I ended up going to an IRS Taxpayer Assistance Center (like Khalid mentioned) and they verified my documents in person - no appointment stress since I called well in advance. The whole appointment took maybe 30 minutes. For your situation as a student receiving a taxable stipend, you'll likely qualify for Exception 1(a) which allows you to apply for the ITIN along with your tax return. But since you mentioned getting the stipend soon, you might want to apply now under Exception 2(c) if you're receiving any kind of scholarship or fellowship income. One tip that saved me: bring extra copies of everything to your appointment or Certifying Acceptance Agent visit. I brought like 3 photocopies of my passport, visa, I-20, and any other supporting docs. The agent kept one set and I got to keep my originals and the other copies. The whole process took about 9 weeks for me (this was last spring), but like Lena mentioned, it's taking longer now. Start as early as you can! Good luck with everything - you've got this! 🙂

Anyone else notice that different tax software handles the $750K mortgage limitation differently? I tried three different ones this year: - H&R Block asked about mortgage balance right away - TurboTax had it buried in a submenu like OP found - FreeTaxUSA never asked me at all! I ended up going with H&R Block just because they seemed most thorough about this particular issue, but now I'm wondering what else the others might be missing...

This is exactly why I switched to working with a CPA a few years ago. I had a similar situation where TurboTax didn't catch that I was over the $750K mortgage limit, and I ended up owing additional taxes plus penalties when the IRS caught it during an audit. The problem is that these software platforms are designed for "typical" tax situations, but as soon as you have anything slightly complex - like a jumbo mortgage, rental properties, or significant investment income - they often miss important limitations and calculations. Yes, the information might be buried somewhere in the software, but if you don't know to look for it, you'll never find it. For something as significant as mortgage interest deduction limits that can affect thousands of dollars in taxes, the software should be much more proactive in identifying when users might be impacted. My CPA caught several other issues that TurboTax had missed over the years. Sometimes the peace of mind and accuracy is worth the extra cost, especially when dealing with high-value mortgages or complex financial situations.

4 Has anyone used TurboTax or similar software for filing back taxes? Or do you need to go through a tax professional? I'm in a similar situation (missing 2019-2020) and trying to figure out the cheapest way to get caught up.

I'm in a very similar boat - didn't file 2018-2020 and just got caught up on recent years. One thing I learned that might help you: if your income was under the filing threshold for those years (around $12,200 for single filers in 2017-2019), you technically weren't required to file. But even if that's the case, filing can still be beneficial. Here's what I'd recommend: start by requesting your wage and income transcripts from the IRS for those years to see exactly what income was reported. This will help you determine if you actually owe anything or if you might be due refunds you didn't expect. For your financial aid situation, while FAFSA mainly looks at the prior-prior year, some schools do ask for additional tax information during verification. Having everything filed removes any potential roadblocks there. The peace of mind factor is huge too. I was constantly worried about getting a letter from the IRS, and filing those back years eliminated that stress completely. Even if your tax guy thinks it's unnecessary, it's your call - and honestly, a good tax professional should support getting you fully compliant rather than questioning it.