Great advice from everyone here! Just to add one more thing - make sure you keep detailed records of all your stock transactions, especially the dates and amounts. The IRS requires you to report the actual purchase date, sale date, and both the cost basis and sale price for each transaction on Form 8949. If you're using multiple brokerages like some folks mentioned, you'll need to gather 1099-B forms from each one. Sometimes the cost basis isn't reported correctly (especially for older purchases), so having your own records helps avoid headaches later. I learned this when I got audited a few years back - having organized records made the whole process much smoother. Also, don't stress too much about the timing. As others said, claiming the loss now is usually the right move since you get the tax benefit immediately and any unused portion carries forward automatically.

One thing I haven't seen mentioned yet is that you should also consider the state tax implications of your capital loss. Some states don't allow capital loss deductions or have different limits than the federal $3,000 per year. For example, New Jersey doesn't allow capital loss deductions against ordinary income at all. Also, if you're planning to sell profitable investments next year, you might want to think strategically about the timing. You could potentially sell some winners before year-end to take advantage of your current loss, or if you're in a higher tax bracket this year, the $3,000 deduction against ordinary income might be more valuable now than carrying it forward. Just make sure you don't fall into the wash sale trap if you're thinking about buying back any of those stocks you sold at a loss!

Don't panic - these IRS crypto letters are becoming more common, but they're often wrong about the amounts owed. The key thing to understand is that the IRS typically assumes $0 cost basis for any crypto transactions they can't fully trace, which massively inflates what they think you owe. Since you got a 6173 letter, you absolutely must respond within 30 days. Here's what I'd recommend: 1. Gather ALL your transaction records from every exchange/wallet you used 2. Calculate your actual cost basis for each transaction (what you originally paid for the crypto) 3. Document any crypto-to-crypto trades with proper fair market values at the time of each trade The $6,800 they're claiming is likely based on incomplete information. If you bought $15,000 worth of crypto and it appreciated before you traded it, your actual taxable gain would be much less than what they're assuming. You have three options: pay the assessment, file an amended return with correct calculations, or dispute it entirely with documentation. Given the amount involved, it's probably worth consulting with a tax professional who specializes in crypto taxation - they can often get these assessments reduced significantly or eliminated entirely. Don't just pay it without fighting back. The IRS crypto enforcement is aggressive but often inaccurate.

I went through something very similar last year and want to share what worked for me. The IRS sent me a letter claiming I owed $4,200 for crypto transactions, but after properly documenting everything, I ended up owing only $380. The biggest mistake people make is not keeping detailed records of their cost basis. Every time you buy crypto, that purchase price becomes your cost basis. When you trade or sell, you calculate gains/losses based on the difference between your cost basis and the fair market value at the time of the transaction. Here's what saved me: I went back through all my exchange accounts (Coinbase, Kraken, Binance) and downloaded every single transaction CSV file. Then I traced each coin from purchase to sale/trade. The IRS was assuming I got my crypto for free (zero cost basis) for transactions they couldn't fully trace. Since you have a 6173 letter, you MUST respond within 30 days. Don't ignore it. I'd recommend either using one of the crypto tax software tools mentioned here or hiring a CPA who specializes in crypto. The upfront cost is way less than paying an inflated IRS assessment. Also keep in mind that crypto-to-crypto trades are taxable events, but you can often have losses that offset gains. The IRS letter probably doesn't account for any losses you might have had.

I went through a hardship withdrawal two years ago when my husband was out of work for seven months. Here's what I wish someone had told me beforehand: First, make absolutely sure you've exhausted other options. I should have looked into my company's employee assistance program - they offered emergency loans with much better terms than I realized. Also check if your state has any hardship programs or if you qualify for unemployment benefits if you haven't already. Second, the process took longer than expected. From application to getting the money was about 3 weeks for me, so don't count on this being a quick fix if you're facing immediate deadlines like foreclosure. The tax hit was brutal - I withdrew $12,000 and only netted about $8,400 after taxes and penalties. But honestly, it kept us in our house and gave us breathing room to get back on our feet. Sometimes you have to make the best of a bad situation. One thing that helped was immediately increasing my 401k contribution percentage once we recovered financially. I bumped it up by 2% to try to make up for some of the lost time. It's not perfect, but it's better than nothing. Don't let people shame you for considering this - these accounts exist for emergencies, and it sounds like you're in a legitimate one. Just make sure you're making an informed decision with all the facts.

I've been following this thread and wanted to add something that hasn't been mentioned yet - the psychological aspect of taking a hardship withdrawal. When I had to do one three years ago during my divorce, I felt like I was "stealing from my future self" and it created a lot of guilt and anxiety. What helped me was reframing it: this wasn't a failure, it was using a tool that exists for exactly these situations. Your 401k is part of your overall financial safety net, and sometimes you need to use that safety net to prevent a much worse outcome. Also, consider the alternative costs. If you don't take the withdrawal and end up missing mortgage payments, defaulting on loans, or going into high-interest debt, those consequences could be far worse than the taxes and penalties. I ran the numbers on what would happen if I let things spiral versus taking the withdrawal, and the withdrawal was clearly the better choice. One practical tip: if you do move forward, consider having extra taxes withheld from the distribution beyond the mandatory 20%. I had them withhold 30% total to avoid owing money at tax time. It meant less cash upfront, but no nasty surprises in April. You're dealing with a tough situation, but you're being smart by researching thoroughly before deciding. That alone tells me you'll make the right choice for your family's circumstances.

I think there's also an important practical consideration that hasn't been fully explored yet - the administrative and compliance costs of different tax systems. While flat taxes seem simpler in theory, the reality is that even with a flat rate, you still need to define what constitutes "income" - do you include capital gains, inheritance, investment returns, business expenses, etc.? These definitional questions create complexity regardless of the rate structure. Progressive systems, despite having multiple brackets, often capture these nuances better and can be designed to close loopholes that disproportionately benefit high earners. Many countries with flat taxes have found they need to add back complexity over time to prevent tax avoidance. From a revenue perspective, progressive taxation also tends to be more stable during economic downturns since it relies more heavily on higher incomes that are less volatile than lower incomes during recessions. That said, I really appreciate how this discussion has highlighted that "fairness" isn't just a mathematical concept - it involves real judgments about economic impact, social values, and practical outcomes. Both systems have legitimate philosophical foundations.

I think one aspect that deserves more attention in this discussion is how progressive taxation can actually enhance economic mobility and opportunity - something that benefits society as a whole. When lower-income individuals keep more of their earnings through lower tax rates, they're more likely to invest in education, start small businesses, or take entrepreneurial risks. This creates a more dynamic economy where talent can rise regardless of starting point. Meanwhile, those at higher income levels often have wealth that generates returns through investments, real estate, and business ownership - income sources that are less dependent on their immediate tax burden. The progressive structure recognizes that a wealthy person's ability to generate future income is less affected by current taxation than someone living paycheck to paycheck. There's also the network effects to consider. Higher earners typically benefit more from stable, educated communities - their businesses need skilled workers, reliable infrastructure, and consumer spending power. Progressive taxation helps maintain these conditions by ensuring public investment in education, infrastructure, and social stability. So while I understand the intuitive appeal of "same percentage = fair," I've come to see progressive taxation as an investment in the economic ecosystem that ultimately benefits everyone, including high earners.

Just wanted to share my experience as someone who recently went through this exact situation. I had overdue returns for 2019 and 2020, and like you, I was confused about the IP PIN requirement on PriorTax. After reading through all the helpful advice in this thread, I ended up calling the IRS IP PIN line at 1-800-908-4490 (thanks Hunter Hampton for that number!). Surprisingly, I got through in about 20 minutes and confirmed I didn't have an IP PIN. The agent explained that the confusion often comes from tax software asking about the most recent year's PIN even when filing older returns. I ultimately decided to try a different service after reading about the hidden fees issue with PriorTax. Used FreeTaxUSA for my 2019 return and one of the AI-powered services mentioned here for 2020. Both were much more transparent about their pricing upfront, and neither had confusing IP PIN questions. My advice: definitely verify your IP PIN status first using either the IRS website or phone line, then shop around a bit before committing to any service. The peace of mind of knowing exactly what you'll pay is worth the extra research time.

I've been following this thread closely since I'm dealing with a similar situation - overdue 2021 return that I keep putting off. The IP PIN confusion seems to be a common issue across multiple tax services, not just PriorTax. What I found really helpful from reading everyone's experiences is that there are essentially three steps to handle this properly: 1) Verify your IP PIN status through the IRS (either online or that direct phone line), 2) Compare the actual total costs of different services upfront, and 3) Make sure whatever service you choose clearly explains their process for prior year returns. The hidden fees issue is particularly concerning since we're already dealing with potential penalties for late filing. The last thing anyone needs is surprise charges on top of everything else. Has anyone here actually calculated the total cost difference between these various services when you factor in all fees? I'm curious if the premium services like the AI-powered ones end up being cost-effective when you consider the time savings and reduced confusion.