Do I have to do anything special with 199A dividends when using FreeTaxUSA instead of TurboTax? My 1099-DIV has about $32 in box 5 for Section 199A dividends.

Just wanted to add some clarity about the thresholds for Form 8995 vs 8995-A. If your taxable income is under $182,050 (single) or $364,100 (married filing jointly) for 2023, you can use the simplified Form 8995, which is much easier. Above those thresholds, you need the more complex 8995-A. For small amounts like yours ($5.45), you're definitely in simplified territory regardless of your income level. Most tax software like TurboTax will automatically determine which form applies to your situation and handle the calculations behind the scenes. The key is just making sure you enter that Box 5 amount from your 1099-DIV correctly when prompted. One thing to watch out for - if you have multiple 1099-DIVs with 199A dividends, make sure you add them all up. The 20% deduction applies to the total amount across all your qualified sources.

This is a great breakdown of the pro-rata calculations! I want to emphasize one important timing consideration that could affect your situation: make sure you complete this reverse rollover before making any new IRA contributions or conversions in 2025. The pro-rata rule looks at your IRA balances at the end of the tax year, so if you're planning to do another backdoor Roth conversion in 2025, you'll want to get that pre-tax money out of your IRAs first. Otherwise, you'll be back to dealing with the same pro-rata complications. Also, since you mentioned your rollover IRA has grown to $85,000, double-check that your 401(k) plan doesn't have any limits on incoming rollover amounts. Some plans cap rollovers at certain dollar amounts or have waiting periods between rollovers. One last thing - keep detailed records of this entire transaction. The IRS sometimes gets confused about partial rollovers from mixed IRAs, and having clear documentation of your basis calculation and the specific amounts transferred can save you headaches if they ever question it during an audit.

Just wanted to add another perspective on the calculation method since I see some great advice here already. You're absolutely correct to go with Option 2 - the basis remains at the fixed dollar amount of $6,825. Here's a simple way to think about it: when you paid taxes on that $6,825 during your backdoor Roth conversion, you essentially "bought" that amount as your after-tax basis in traditional IRAs. Market gains and losses don't change what you already paid taxes on - they just affect the overall account value. One thing I'd recommend is calling your 401(k) plan administrator before initiating the rollover to confirm: 1. They accept partial rollovers from IRAs (as others mentioned, some don't) 2. Their process for handling the pre-tax designation 3. Any paperwork they need from you to properly code the incoming funds Also, when you request the rollover from your IRA custodian, be very specific that you're rolling over "$78,175 of pre-tax funds, leaving $6,825 of after-tax basis in the IRA." Some custodians will try to do a proportional distribution if you're not crystal clear about your intent. This reverse rollover strategy will definitely clean up your future backdoor Roth conversions - you'll essentially have a "clean slate" IRA situation going forward!

Has anyone else noticed that state websites are COMPLETELY useless for determining your federal tax status? My state business lookup also just says "Domestic Corporation" which tells me absolutely nothing about whether I'm an S or C corp. I ended up having to dig through a box of old papers to find the IRS acceptance letter from when my accountant filed the S election. If you can't find any paperwork, definitely call the IRS - it's worth the wait time to avoid filing incorrectly!

This is such a common source of confusion! I went through the exact same panic last year. Since you mentioned you incorporated last year and don't remember filing Form 2553, you're almost certainly a C Corporation by default. This means you should be filing Form 1120 (not 1120-S) and your extension should be Form 7004. The rejection of your extension was likely because you used the wrong form - if you tried to file an S-corp extension but you're actually a C-corp, that would explain the rejection. I'd recommend calling the IRS Business Tax Line immediately at 800-829-4933 to confirm your status and get guidance on refiling the correct extension. Don't panic though - if you act quickly, you can usually resolve extension issues and avoid major penalties. The key is addressing it ASAP rather than waiting. Good luck!

As someone who works in tax compliance, I want to emphasize something that's been touched on but bears repeating: the wash sale "functionality" isn't missing from FreeTaxUSA - it's working exactly as the IRS intends it to work. The wash sale rule requires brokers to adjust your cost basis and report it on your 1099-B. When you see Box 1g checked, that's your broker telling you (and the IRS) that they've already done all the wash sale calculations and factored them into the adjusted basis in Box 1e. This is actually much better than having tax software try to recalculate wash sales, because your broker has access to all your trading data throughout the year and can track the 30-day windows perfectly. If tax software tried to duplicate this calculation, there's a higher chance of errors or discrepancies with what your broker reported to the IRS. For anyone still worried: the IRS computer systems automatically match your 1099-B entries with what brokers reported. As long as you enter the exact numbers from your 1099-B into FreeTaxUSA, you're in complete compliance. No additional forms, no manual calculations needed. You're making the right choice sticking with FreeTaxUSA and saving the money!

I went through this exact same situation last year with about $18k in wash sales from some aggressive trading on tech stocks. I was convinced FreeTaxUSA was inadequate and was ready to pay for TurboTax Premium. After doing a deep dive into how wash sales actually work, I realized I was completely misunderstanding the process. Your broker (whether it's Fidelity, Schwab, E*TRADE, etc.) is required by law to calculate wash sale adjustments and include them in the adjusted cost basis they report on your 1099-B. Here's the simple test: Look at Box 1g on your 1099-B forms. If it's checked, your broker has already done ALL the wash sale calculations for you. The adjusted basis in Box 1e already includes the wash sale adjustments. You literally just enter those numbers exactly as they appear into FreeTaxUSA - no special functionality needed. I saved the $79 TurboTax fee and my return was processed without any issues. The IRS gets the same 1099-B forms you do, so as long as your entries match exactly what your broker reported, you're golden. The only time you'd need special wash sale functionality is if your broker somehow failed to calculate wash sales properly (which would be extremely unusual for major brokerages) or if you're doing complex manual calculations for some reason. Check Box 1g first before spending extra money - you'll probably find FreeTaxUSA works perfectly fine!

I'm dealing with almost the exact same situation right now! Filed as independent when I should have been claimed as a dependent by my parents. Reading through all these responses has been incredibly helpful - especially hearing from people who actually went through this process successfully. A couple of quick questions for those who have been through this: How specific should the cover letter be? Should we include the exact dollar amounts of the tax difference, or just explain the filing status change? And has anyone had issues with the IRS questioning whether you actually qualify as a dependent after the fact? My parents are really stressed about the potential interest charges, but it sounds like most people here had success paying the lower corrected amount rather than the full incorrect bill. Thanks everyone for sharing your experiences - this is way more helpful than anything I could find on the IRS website!

I went through this exact situation two years ago and want to add a few practical tips that really helped us navigate the process smoothly. First, when you're preparing your cover letters for the amendments, include a clear timeline showing when the original returns were filed, when you realized the mistake, and when you're filing the corrections. This helps the IRS understand the sequence of events. Second, make copies of EVERYTHING before mailing - not just your amended returns, but also the cover letters, supporting documents, and payment calculations. I can't stress this enough because mail can get lost, and having exact copies saved us when we had to follow up. Third, consider sending your amendments via certified mail with return receipt. Yes, it costs a bit more, but you'll have proof of delivery and timing, which can be crucial if there are any processing delays or questions later. One thing that really helped speed our process was including our phone numbers in the cover letters and explicitly stating we were available to answer questions if needed. An IRS agent actually called us to clarify a minor detail, and having that direct communication probably saved weeks of back-and-forth through the mail. The whole process took about 10 weeks for us, and paying the corrected lower amount upfront worked out fine - the small interest charge was much better than the financial stress of overpaying. Hang in there!