Any recommendations for the best brokerage for doing backdoor Roth? Currently using Schwab but their process is clunky and customer service doesn't seem to understand what I'm trying to do half the time.

Another option to consider is converting immediately after contribution without waiting for settlement. Many brokerages including Fidelity allow you to initiate the Roth conversion on the same day as your Traditional IRA contribution, even while the funds are still settling. I've been doing this for the past two years and it eliminates the interest issue entirely. The conversion processes simultaneously with the contribution settlement, so there's zero time for interest to accrue. My 1099-R always shows exactly my contribution amount with no earnings portion. The key is to set up the conversion transaction right after making your contribution - don't wait for the contribution to fully clear first. This has made my tax reporting much cleaner since I never have to deal with the small taxable earnings amounts that accumulate during those settlement days.

I had this exact same dilemma when setting up my SaaS business for project management software earlier this year! After reading through IRS guidelines and consulting with my accountant, I went with "Service" and it was definitely the right call. The deciding factor for me was realizing that our customers aren't buying software - they're buying access to our hosted platform along with ongoing maintenance, updates, security, and support. We retain full ownership of the code and infrastructure while providing the service of making it available to them. What really sealed it was thinking about what happens when a customer stops paying: they immediately lose access because they were never purchasing ownership of anything. They were paying for the ongoing service of platform access, which is fundamentally different from buying a software product they would own. One practical tip that helped me during the application process: when describing your business activities on the EIN form, use language that emphasizes the service aspects. I wrote something like "providing cloud-based software platform services" rather than anything that could be interpreted as selling software products. This keeps everything consistent with your "Service" category selection.

I've been following this thread closely as I'm in the exact same situation with my SaaS startup! After reading all these experiences, I'm confident that "Service" is the right choice. What really helped me understand was the consistent theme everyone mentioned about ownership vs. access. One thing I'd like to add that hasn't been mentioned yet: if you're planning to integrate with other business tools or APIs, make sure to document these integrations as part of your service offering. We're building integrations with CRM systems and accounting software, and our lawyer mentioned that these integrations further strengthen the "service" classification since we're providing ongoing connectivity and data synchronization services. Also, for anyone else going through this process, I found it helpful to look at the actual IRS Publication 334 (Tax Guide for Small Business) which has examples of service businesses. Software as a Service is specifically mentioned as falling under professional and technical services rather than retail trade. Thanks everyone for sharing your experiences - this thread has been incredibly valuable for getting this right from the start!

I'm currently going through this same process and it's been 8 days since I got the ID.me notification. Reading through everyone's experiences here is really helpful - sounds like I should expect the letter sometime in the next week or so. One thing I'm curious about: does the letter come from ID.me directly or from the IRS? The notification in my account wasn't totally clear about who would be sending it. Also, for those who completed the verification over the phone, did you call the number on the letter itself or the main IRS line? Want to make sure I'm prepared when my letter arrives!

I just went through this process last month and wanted to share my timeline to help others plan. Got the ID.me notification on January 28th, letter arrived February 12th (15 calendar days), and completed verification the same day I received it. One tip I wish I'd known: the letter envelope says "Department of Treasury - Internal Revenue Service" on it, so don't accidentally throw it away thinking it's junk mail! The control number was clearly printed in a box at the top of the letter. I used the phone number provided on the letter itself (not the general IRS line) and got through to an agent in about 20 minutes who walked me through the verification. My ID.me account was fully restored within a few hours. The waiting period is definitely nerve-wracking, but the actual verification process once you have the letter is pretty straightforward. Hang in there!

This thread has been absolutely amazing to read through! I just discovered the same "Federal Interest Withheld" line on my savings account statement yesterday and was completely panicked until I found this discussion. Like Omar and so many others here, this appeared out of nowhere after having the account for over a year with no issues. The systematic approach everyone has outlined is incredibly helpful. I love Carmen's four-scenario breakdown - it gives me a clear framework to work within instead of just guessing what might be wrong. And the mathematical explanations from Connor really helped me understand that my $14 withholding amount is actually reasonable based on my account balance. I'm planning to start with checking my online banking profile tomorrow to look for that backup withholding status flag that several people mentioned. If that shows active withholding, I'll follow the advice about calling during off-peak hours to get the specific reason code from my bank. The timeline expectations (4-6 weeks for most IRS-related issues) are really helpful for planning purposes. It's such a relief to understand this is prepaid taxes rather than lost money, and that it will be credited when I file next year. Thank you to everyone who shared such detailed experiences - this community support makes navigating confusing financial situations so much less stressful! I'll definitely update with my results to help the next person who finds themselves in this situation.

I'm so glad I found this thread! I just noticed "Federal Interest Withheld" on my money market account statement for the first time and was completely confused. Reading through everyone's experiences has been incredibly reassuring - it's amazing how this community has broken down such a complex issue into manageable steps. Like many others here, I was initially worried that money was being taken unfairly, but understanding that it's prepaid taxes that will be credited back makes all the difference. Connor's mathematical breakdown really helped me verify that my $22 withholding amount is reasonable for my account balance and interest rate. I'm going to follow the systematic approach that's been outlined so clearly by Haley, Lucas, and others: 1. Check my online banking profile for backup withholding status 2. Call the bank during off-peak hours for the specific reason code 3. Use the early morning IRS calling strategy if needed 4. Keep detailed records going forward Carmen's four-scenario framework is particularly helpful for understanding which resolution path to follow. The timeline expectations (4-6 weeks for IRS issues) give me realistic planning guidelines. One thing I wanted to add - for anyone else just discovering this issue, don't let it ruin your weekend like it almost did mine! This thread shows that while it requires some patience and paperwork, there's a clear path to resolution and you're definitely not alone in dealing with this. Thanks to everyone who shared such detailed experiences. I'll update once I work through the process!

I went through almost the exact same situation! My divorce took 18 months to finalize and I was so confused about filing status. Here's what I learned from my tax preparer: Since you're still legally married on Dec 31st, you have to choose between Married Filing Jointly or Married Filing Separately. Given that you don't trust your ex with finances (totally understandable), I'd strongly recommend filing separately even if it costs more in taxes. When you file separately, you're only responsible for your own tax return and any issues that come up. With joint filing, you're both liable for the entire tax bill AND any problems like unreported income or questionable deductions your ex might have. A few things to watch out for when filing separately: - If one spouse itemizes, both must itemize (you can't mix standard deduction with itemizing) - You lose some credits like the Earned Income Credit - Student loan interest deduction is limited - You can't claim education credits But honestly, the peace of mind of not being tied to his tax issues was worth paying a bit extra. During divorce proceedings, protecting yourself financially should be the priority. You can always file amended returns later if needed, but you can't undo the liability issues that come with joint filing if things go sideways.

I was in a very similar situation a few years back - divorce proceedings dragging on forever while trying to figure out tax filing. One thing that really helped me was understanding the "abandoned spouse" rule that some people don't know about. If you've been living apart for the last 6 months of the tax year AND you have a qualifying child who lived with you for more than half the year, you might be able to file as Head of Household even while still legally married. Since you mentioned your kids are grown though, this probably doesn't apply. Given your situation where trust is completely broken down, I'd definitely go with Married Filing Separately. Yes, you'll likely pay more in taxes, but you'll sleep better at night knowing you're not on the hook for any surprises your ex might have hiding in his finances. During my divorce, my ex had some side income he "forgot" to mention - if we had filed jointly, that would have been my problem too. The most important thing is to keep meticulous records of everything and consider getting a tax pro who specializes in divorce situations. They can help you navigate the timing issues and make sure you're claiming everything you're entitled to while protecting yourself from liability. Good luck with everything - this phase will pass!