Just wanted to add - make sure you keep copies of EVERYTHING related to your nondeductible contributions forever (or at least until you've withdrawn all the money). I learned this the hard way. I had made nondeductible contributions years ago, filed my 8606 forms properly, but then lost track of the paperwork during a move. When I started taking distributions years later, I couldn't prove my basis to the IRS and ended up paying tax on money that should have been tax-free coming out. The burden of proof is 100% on you to track your nondeductible basis, not on the IRS. They don't keep easily accessible records of your basis year to year.

Great advice from everyone here! I went through this exact situation last year when I discovered I had missed filing Form 8606 for multiple years of nondeductible contributions. One thing I'd add that helped me tremendously - when you mail your Form 8606, use certified mail with return receipt requested. The IRS can be slow to process these forms, and having proof of delivery gives you documentation that you filed it timely (even though it's late for the original tax year). Also, consider keeping a detailed log of all your IRA transactions going forward. I created a simple spreadsheet that tracks: - Date of contribution - Amount contributed - Tax year it applies to - Whether it was deductible or nondeductible - Form 8606 filing status This has made my annual tax prep so much easier and ensures I never miss tracking my basis again. The few hours spent organizing this information upfront saves tons of stress later, especially if you ever need to prove your basis to the IRS during an audit or when taking distributions. Your numbers look correct for the 2022 form, and yes, you should include the full $15,500 basis on your 2023 Form 8606 even if the 2022 form hasn't been processed yet. The key is that you're filing it before or with your 2023 return.

Has anyone implemented this practically? Our bookkeeper is confused about how to enter this in QuickBooks. Does the full guaranteed payment still show up in the books, but then there's an offsetting transaction for the 401k contribution?

Great question! I went through this exact same situation with my LLC last year. The key thing to understand is that guaranteed payments are treated as self-employment income for tax purposes, but the mechanics of how the money flows can be flexible. Your LLC can absolutely withhold the $1,000 for your 401(k) contribution directly from the $12,500 guaranteed payment and remit it to the plan, then pay you the remaining $11,500. This is actually preferable from a cash flow perspective and keeps everything clean administratively. The 401(k) plan administrator generally doesn't care about the source - they just need to receive the contribution and proper documentation. What matters for tax purposes is that the full $12,500 still gets reported as guaranteed payments on your K-1, regardless of whether $1,000 went directly to your 401(k) or through your personal account first. Just make sure your operating agreement is clear about this arrangement, and that your bookkeeper properly tracks the full guaranteed payment amount for tax reporting. The IRS views the entire $12,500 as taxable guaranteed payment income to you, even though part of it went directly to retirement savings.

I did Liberty's course 3 years ago and Block's last year (wanted to compare). The BIGGEST difference nobody's mentioned is what happens AFTER training. Liberty Tax - Got assigned to a kiosk in a shopping center, had to dress as the Statue of Liberty sometimes (seriously), and mostly handled simple returns. Advancement was slow. H&R Block - Worked in an actual office, got mentored on increasingly complex returns, and had a clear path to becoming an enrolled agent with higher pay. They also kept me busier throughout the year with tax planning. So think beyond just the course to what kind of career path you want!

This is such a helpful thread! I'm actually in the same boat as Maya - currently enrolled in a Liberty Tax course but considering my options. One thing I'd add is to check if either company offers ongoing support after you complete the course. I've heard some locations provide mentoring during your first tax season, which could be really valuable for building confidence with complex returns. Also, has anyone looked into whether the training from either program helps if you eventually want to become an Enrolled Agent? I'm thinking long-term about building a career in tax preparation, and I want to make sure I'm setting myself up for success beyond just the seasonal work. The pay difference Isaac mentioned is definitely something to consider too - that extra $2-3/hour really adds up over a full tax season!

Has anyone dealt with Canadian RRSP accounts when making the first-year choice? I've heard there's a special form you need to file to avoid the US taxing these accounts as regular investment income.

I went through this exact same situation when I moved from Toronto to Austin in September 2024! The first-year choice election was definitely the way to go - it saved us thousands compared to filing as non-residents. A few things to keep in mind that I learned the hard way: Make sure you calculate the 31 consecutive days and 75% presence test carefully. Since you arrived in August, you should easily meet this. Also, don't forget that making this election means you'll be considered US residents from January 1, 2024 forward for tax purposes, so you'll need to report ALL worldwide income including your Canadian employment from early in the year. The foreign tax credit on Form 1116 will help offset the Canadian taxes you already paid, but gather all your Canadian tax documents (T4s, Notice of Assessment, etc.) because you'll need them. One tip: if you had any Canadian investment accounts (TFSAs, RRSPs, etc.), there are additional forms and elections to consider. The US-Canada tax treaty has some helpful provisions but you need to be proactive about making the right elections. Filing jointly with the full standard deduction made a huge difference for us compared to the non-resident alternative. Definitely worth consulting with someone who knows cross-border tax if you have a complex situation, but the first-year choice sounds perfect for your circumstances.

Can someone explain how the 0%/15%/20% brackets work for qualified dividends? Is it the same income thresholds as regular tax brackets? I'm confused about when the rate jumps from 0% to 15%.

This is such a great question and one that trips up a lot of people! The key thing to remember is that ALL your income sources (wages, ordinary dividends, qualified dividends, interest, etc.) get added together to determine your total taxable income after deductions. That total taxable income number is what determines which tax bracket you fall into for BOTH your regular income tax rates AND your qualified dividend rates. So yes, if you have a bunch of ordinary dividends, they absolutely can push your qualified dividends into a higher tax bracket. Here's a simple example: Let's say you're single and after deductions your taxable income would be $40,000 from just wages. Your qualified dividends would be taxed at 0%. But if you also have $10,000 in ordinary dividends, now your total taxable income is $50,000, which pushes your qualified dividends into the 15% bracket. It's worth doing some planning around this, especially near year-end, to see if you can manage your income to stay in a lower qualified dividend bracket if possible!