Has anyone successfully negotiated penalty abatement for a CP2000 related to RSUs? I'm in a similar situation and they're charging me both underpayment penalties and interest.

I went through this exact same situation last year with my RSU vesting and can totally relate to the panic! The good news is this is usually fixable without owing the full amount. Here's what likely happened: Your employer correctly included the $65K RSU value in your W-2 Box 1 when the shares vested (this is ordinary income). When you sold the shares immediately, your brokerage reported the sale on Form 1099-B showing $65K proceeds. However, if the cost basis wasn't properly reported or if you didn't file Form 8949/Schedule D, the IRS thinks you had $65K in unreported capital gains on top of your W-2 income. First, check your W-2 to confirm the RSU income is included. Then you'll need to respond to the CP2000 with: 1. A letter explaining the RSUs were already taxed as W-2 income 2. Copy of your W-2 showing the income was included 3. Form 8949 showing the stock sale with correct cost basis (should equal the proceeds, resulting in $0 gain) The key is proving to the IRS that this income was already taxed once through your payroll, not that you have additional unreported capital gains. Don't panic - this is a common issue that gets resolved once you provide the proper documentation!

Is this also true for partial conversions? I'm thinking about converting just 50k of my traditional IRA to Roth this year to spread out the tax hit. Will I see this same code 2, and will the Form 8606 still handle the partial non-deductible portion correctly?

I went through this exact same confusion with my traditional IRA to Roth conversion! Code 2 on the 1099-R is actually pretty standard for these conversions, even though it seems counterintuitive since you're not really taking an "early distribution." The most important thing is making sure you have proper documentation of your non-deductible contributions. If you've been making after-tax contributions to your traditional IRA because you were over the income limits, you should have been filing Form 8606 each year to track your basis. This is absolutely critical to avoid double taxation. One thing I learned the hard way - keep excellent records of all your IRA contributions and Forms 8606. The financial institutions don't track your basis for you, so if you ever get audited or need to reference your contribution history, having those forms and records will save you major headaches. The pro-rata rule mentioned earlier can get complex if you have multiple IRAs, so definitely consider getting professional help if your situation is complicated.

Something nobody mentioned yet - if you have employees in your LLC (even if it's a disregarded entity), you MUST use an EIN. So even if you're currently solo, if you think you might hire someone in the future, better to start with the EIN now to avoid changing everything later. Also, banks often require EINs for business accounts, even for SMLLCs. Using your EIN consistently from the start just makes everything cleaner.

This is such a common confusion point for new LLC owners! I went through the same thing with my consulting business. The key thing to remember is that even though your SMLLC is disregarded for income tax purposes, it's still a separate legal entity for reporting purposes. You should definitely give your client the EIN, not your SSN. This applies whether it's a 1099-NEC or 1099-MISC. The IRS wants to see consistency between the TIN on the 1099 and what you use for business purposes on your Schedule C. One tip: when you give clients your EIN, also provide them with your LLC's legal name exactly as it appears on your EIN confirmation letter. This helps ensure they fill out the 1099 correctly. I learned this the hard way when a client used a shortened version of my business name and it caused matching issues. Don't stress too much about getting this perfect immediately - you can always send corrected information to clients if needed. But starting with the EIN is definitely the right approach for keeping your business and personal finances properly separated.

I went through this exact same thing in January! My verification status disappeared after about 3 days and I totally panicked thinking something went wrong. But it turns out that's completely normal - when the status disappears it means you successfully passed verification and your return moved into regular processing. I got my 846 code exactly 11 days after the verification status disappeared, and the refund hit my account 4 days after that. The waiting is nerve-wracking but try not to stress too much - the disappearing status is actually good news! Just keep checking your transcript every few days and you should see that 846 code soon.

I can totally relate to the anxiety! The same thing happened to me about 3 weeks ago - verified successfully on a Tuesday, felt so relieved, then checked Thursday and the verification status was completely gone. I thought I'd have to start over! But everyone here was right - it's actually a good sign. I ended up getting my 846 code exactly 10 days after the status disappeared, and my direct deposit came through 3 days later. The hardest part is just the waiting and not knowing, but your verification disappearing means you're officially in the processing queue now. Keep checking your transcript every few days and try not to refresh it obsessively like I did (easier said than done I know!). You should see movement soon!

This is an excellent discussion with lots of detailed considerations! I wanted to add one more important aspect that could significantly impact your tax situation - the potential for depreciation recapture if your LLC owns any depreciable assets. Even though your LLC elects S-Corp taxation, when you sell your membership interest, any depreciation that was claimed on business assets (equipment, furniture, building improvements, etc.) may need to be "recaptured" and taxed as ordinary income rather than capital gains. This recapture is taxed at up to 25% for Section 1250 property (real estate) and as ordinary income for Section 1245 property (equipment, furniture, etc.). The amount of recapture depends on the depreciation methods used and how much depreciation was allocated to you over the years through your K-1s. If your LLC has significant depreciable assets, this could meaningfully change your expected tax liability on the sale. Also, consider whether you need to make any estimated tax payments for the quarter in which you complete the sale. If the capital gains are substantial, you don't want to get hit with underpayment penalties at year-end. Your accountant can help calculate whether you need to increase your quarterly payments to cover the additional tax liability. This adds another layer to the timing considerations others have mentioned - not just which tax year, but also making sure you're covered on estimated payments to avoid penalties.

This has been an incredibly comprehensive discussion! As someone who went through a similar LLC member buyout last year, I wanted to add one final consideration that saved me from a costly mistake - make sure to review any buy-sell agreements or operating agreement provisions that might trigger additional tax consequences. In my case, our operating agreement had a clause that automatically converted outstanding profits interests into capital interests upon a member departure. This created an unexpected ordinary income event separate from the capital gains on the actual sale. My attorney caught it during the document review, but it would have been a nasty surprise otherwise. Also, if your LLC has any outstanding Section 83(b) elections from equity compensation or profits interests granted over the years, the sale might trigger recognition of previously deferred income. This is more common in service businesses but worth checking. One practical tip: create a comprehensive checklist with your accountant covering all the issues raised in this thread - basis calculation, Section 751 hot assets, depreciation recapture, Section 199A implications, state tax requirements, estimated payment needs, and any agreement-specific triggers. Having everything documented in one place will help ensure nothing gets overlooked in the complexity of the transaction. Best of luck with your sale - with proper planning and the right professional guidance, you should be able to structure this in a tax-efficient way for both you and your partner!