I've been dealing with ESPP tax issues for years and want to clarify a few things based on my experience. The key is understanding that when you purchase ESPP shares at a discount, that discount is typically treated as compensation income and should appear on your W-2 in the year you bought the shares (not when you sold them). If you can find your W-2 from the year you purchased the ESPP shares, look for the discount amount included in your wages. If it's there, then you should definitely use the adjusted cost basis to avoid being taxed twice on the same money. However, if for some reason the discount wasn't included in your W-2 when you purchased (which can happen with some plan structures), then you'd use the regular cost basis and pay tax on the discount as part of your capital gains. The most important thing is to use Form 8949 with the proper adjustment code when your basis differs from the 1099-B. Don't just enter a different number without explanation - that's what triggers those CP2000 notices people mentioned. I'd also recommend keeping detailed records of your ESPP purchases, including purchase dates, discount amounts, and whether those discounts were included in your W-2 income. This documentation will be invaluable if you ever need to justify your basis calculations to the IRS.

I went through this exact same situation last year and ended up having to amend my return because I initially used the wrong basis. Here's what I learned: The key is determining whether the ESPP discount was already taxed as ordinary income. Look at your W-2 from the year you PURCHASED the shares (not when you sold them). If the discount amount is included in your wages, then you should use the adjusted cost basis because you've already paid income tax on that discount. When you file, make sure to use Form 8949 and include adjustment code "B" with a description like "ESPP basis adjustment per broker supplement." This tells the IRS why your reported basis differs from the 1099-B. I also recommend downloading IRS Publication 525 which covers employee stock purchase plans specifically. It clearly explains that if the discount was included in your income when you bought the shares, you don't pay tax on it again when you sell. The good news is that most tax software (including FreeTaxUSA) will handle the Form 8949 adjustments properly if you know to look for that section. Don't just enter the adjusted basis in the regular capital gains section without documenting the adjustment - that's what causes the IRS matching issues people have mentioned.

Just wanted to share my recent experience since I was in almost exactly the same situation as OP - hadn't filed for 3 years and lost all my W-2s. I ended up going the Form 4506-T route after the online system wouldn't verify my identity (probably because of the missing filings). The key things that helped me: 1) Make sure to put your own name and address in line 5a to get the unmasked version (as Diego mentioned), 2) Be very specific about which tax years you need, and 3) Allow extra time - mine took about 2.5 weeks to arrive by mail. One thing I learned that wasn't mentioned yet - if you're requesting multiple years, you can list them all on one form rather than submitting separate requests. Just write something like "2021, 2022, 2023" in the tax year section. Saved me from having to send multiple forms. The unmasked transcript ended up being exactly what I needed to reconstruct my tax situation. All employer info was there with full EINs, and it even showed estimated quarterly payments I had forgotten about from some freelance work. Really grateful for all the detailed advice in this thread - it made the whole process much less intimidating!

I just want to echo what Dylan said about the transcript showing quarterly payments - this was a lifesaver for me too! I had completely forgotten about some estimated tax payments I made for 2022 and was panicking thinking I'd have to pay penalties on top of what I already owed. Turns out the IRS had record of everything and the transcript showed not only the payment amounts but also how they applied the credits. One additional tip that helped me: when you're filling out Form 4506-T, use black ink and print clearly. I had to resubmit mine the first time because my handwriting was apparently too messy and they couldn't process it. Also, if you're mailing it in, consider sending it certified mail so you have proof they received it. The whole process was actually much more straightforward than I expected once I got the hang of it. Really appreciate everyone sharing their experiences here - this thread has been incredibly helpful!

One thing to be careful about - if you're claiming an exception to the 10% penalty, make sure you're using the right code! I messed this up last year and had to file an amended return. The IRS has specific codes for different exceptions (medical expenses is code 05, first-time home purchase is 09, etc). Also, some free software might let you fill out Form 5329, but won't guide you through figuring out if you qualify for exceptions. That's where I got tripped up - I ended up paying the 10% penalty when I actually qualified for an exception.

I went through this exact same headache last year! After trying multiple "free" services that all wanted to charge me for Form 5329, I ended up using the IRS Free File Fillable Forms directly from the IRS website. It's definitely not as polished as the commercial software, but it's completely free and includes all the forms you need. The interface is pretty basic - it's essentially just fillable PDFs - but it does the calculations for you and e-files directly to the IRS. You'll need to be a bit more careful about entering everything correctly since there's less hand-holding, but for Form 5329 it's pretty straightforward. Another tip: before you file, double-check if you qualify for any exceptions to the 10% penalty. I almost paid the penalty unnecessarily until I realized my medical expenses qualified for an exception. The Form 5329 instructions on the IRS website list all the exception codes - it's worth spending a few minutes reviewing them to see if any apply to your situation. Paper filing is always an option too if you're comfortable with that route. Sometimes the old-fashioned way is the most reliable!

Just a heads up about something many new partnerships miss - don't forget to include your guaranteed payments if you took any regular draws from the business! Those aren't the same as distributions and get reported differently on the K-1.

I went through a very similar situation with my consulting partnership last year when our CPA bailed on us right before the deadline. Here's what I learned that might help you: For your straightforward 50/50 partnership with $34k income and $8.5k expenses, you can absolutely handle this yourself. The key things to remember: 1. Your quarterly distributions of $3,125 each are NOT reported as income on the K-1 - they're just distributions of money you already earned. The actual income that goes on each K-1 would be your share of the net profit (roughly $12,750 each after expenses). 2. Make sure you track your "basis" correctly - this starts with what you each contributed to start the LLC, then increases with your share of income and decreases with distributions taken. 3. For a simple partnership like yours, the main boxes on the K-1 that will have amounts are Box 1 (ordinary business income) and possibly Box 19 (distributions). I used FreeTaxUSA's business version for about $80 and it walked me through everything step by step. The 1065 generates the K-1s automatically once you input all the partnership info. Took me about 3 hours total, and my regular accountant said they looked perfect. Don't stress too much - your situation is pretty straightforward compared to partnerships with multiple income streams or complex allocations!

Can someone explain the support test in more detail? My son made about $24k last year from his part-time job and internship, but he lives at home and I pay for housing, food, utilities, car insurance, health insurance, and his tuition. Even with his income, I think I still provide over half his total support, but how do you actually calculate this?

I went through this exact same situation two years ago with my daughter who turned 19 in October but was in high school until June. The key thing that helped me was getting a letter from her high school confirming she was enrolled as a full-time student for those months - some tax software asks for documentation if there are any questions. One thing to watch out for: make sure when you're entering info in TurboTax that you specify she was a FULL-TIME high school student for those 5+ months, not just enrolled. The software sometimes defaults to part-time if you don't explicitly select full-time status. That small detail completely changed my results. Also, since she made $22k, she'll definitely need to file her own return regardless of whether you claim her as a dependent. Just make sure she checks the box indicating that someone else can claim her as a dependent so there's no conflict when both returns are processed. Based on everything you've described, you should absolutely be able to claim her and keep your head of household status. Don't let the software scare you into filing incorrectly!