The IRS can also cross-reference your income reported on Schedule C with your claimed retirement contributions to see if they're reasonable. If you're claiming max contributions but only reporting modest business income, that might trigger questions. Make sure your profit sharing contributions actually align with your reported business profits!

Another important point about IRS verification - they also use data matching algorithms that compare your reported retirement contributions across multiple forms. For example, if you claim a solo 401k deduction on your 1040 but the amounts don't match what's reported on your business return, that can trigger automated flags. I learned this the hard way when I made an error calculating my maximum employer contribution. The IRS computer systems caught the discrepancy between my Schedule C net profit and the employer contribution I claimed. Even though it was an honest mistake, I had to provide extensive documentation to prove my contributions were legitimate. My advice: run your numbers through multiple calculators before making contributions, and keep a spreadsheet showing exactly how you calculated both your employee and employer contribution limits. This saved me during my correspondence with the IRS because I could show my methodology even though I made an arithmetic error.

For anyone dissolving a C-corp soon - remember that timing can be crucial for tax purposes! We intentionally delayed our liquidation to January so the tax impact hit in the following year. This gave shareholders more time to plan for the capital gains taxes. Also, if your corporation has accumulated E&P (earnings and profits), distributions will be taxed as dividends until E&P is exhausted, before being treated as return of capital. This sequencing can significantly impact the tax treatment of your liquidation. You must exhaust your E&P through dividend distributions before you can distribute amounts that are treated as return of capital or liquidation proceeds.

One important detail that hasn't been mentioned yet - when completing Form 5452 for liquidation distributions, make sure you're consistent with how you report the distributions across all shareholders AND on the corporation's final Form 1120. The IRS will cross-reference these forms, so if you report $X as liquidation distributions on Form 5452, that same amount should appear on the corporation's final return. Also, remember that the corporation must provide each shareholder with their Form 1099-DIV by January 31st following the year of liquidation - these forms will show the liquidation distribution amounts in box 8 or 9. A common mistake is forgetting to file Form 966 within 30 days of adopting the plan of liquidation. This is separate from Form 5452 and is required even for small family corporations. The IRS can impose penalties if Form 966 is filed late, so don't overlook this step in your dissolution timeline.

Anyone know if we're supposed to enter these 1042-S values in local tax software? I use the Australian equivalent of TurboTax and there's nowhere obvious to put "foreign tax paid" from these forms.

Great breakdown from everyone here! As someone who's been through this exact situation, I want to emphasize that the 1042-S is really just a "receipt" showing what happened with your US-source income and withholding. The key thing to check is Box 7a (withholding rate) against your country's tax treaty rate. Australia has a pretty favorable treaty with the US - for most types of income like AdSense, the rate should be 0% or very low. If you're seeing 30% withholding, that means your W-8BEN wasn't properly processed or there was some other issue. One thing I learned the hard way: even if everything looks correct on your 1042-S, make sure you're reporting this income on your Australian tax return. The ATO can cross-reference this data, and you'll want to claim any foreign tax credits for whatever was withheld. Keep these forms with your tax records - they're essentially proof of income and tax paid that you may need later. If you're getting different withholding rates year over year for the same income source, that's usually a red flag that something needs to be fixed with your W-8BEN.

Has anyone used TurboTax for backdoor Roth reporting? I'm trying to DIY this and it keeps giving me errors when I enter my recharacterization.

I went through almost the exact same situation last year! The key thing that saved me was getting everything properly documented on Form 8606. Since you did both the 2023 recharacterization AND the 2024 conversion in the same tax year, you'll need to be extra careful about the sequencing. For your 2023 amended return: You'll report the recharacterized contribution as a nondeductible traditional IRA contribution on Form 8606. This establishes your basis. For your 2024 return: You'll show the conversion on Form 8606 Part II, using the basis you established from 2023. Any earnings that accumulated between your original contributions and the conversion date will be taxable. The tricky part is that some tax software doesn't handle this cross-year complexity well. Make sure your preparer understands that the 2023 recharacterization creates nondeductible basis that carries forward to reduce the taxable portion of your 2024 conversion. If they miss this connection, you could end up paying tax on money that should be tax-free. I'd strongly recommend double-checking their work on Form 8606 - specifically that they're correctly calculating your nondeductible basis from the recharacterized 2023 contributions.

This is incredibly frustrating but totally normal during peak tax season! I've been a tax preparer for 8 years and see this constantly with clients. The IRS security system has become super aggressive - it's not just about your login attempts but also your IP reputation, device fingerprinting, and even network traffic patterns. Here's what usually works: 1) Try mobile data instead of wifi, 2) Use incognito/private browsing mode, 3) Clear ALL site data for irs.gov (not just cookies), and 4) Disable any VPN or proxy. If you're still locked out after 24 hours, call the Practitioner Priority Service at 866-860-4259 - they can usually reset the flag on your account immediately. Don't stress, your account isn't compromised, it's just their overzealous fraud protection doing its thing! 🤗

I've been having this exact same issue for the past three days! It's so frustrating because I literally haven't even attempted to log in recently, but the system keeps saying I've exceeded my attempts. Reading through all these responses has been incredibly helpful - I had no idea about the IP flagging and DDoS protection stuff. Going to try the mobile data trick right now since that seems to be the most successful workaround. It's honestly crazy how aggressive their security system has gotten, but I guess better safe than sorry with all the tax fraud out there. Thanks everyone for sharing your solutions! 🤞