This might be a dumb question, but wouldn't it just be easier to call FreeTaxUSA support? I had this exact same issue last year and their customer service walked me through the exact screens where I needed to indicate I was withdrawing contributions and not earnings.

I went through this exact same situation last year with a Code J distribution from my Roth IRA. The key thing to remember is that with Roth IRAs, the IRS assumes you're withdrawing contributions first (this is called the "ordering rules"), so as long as you haven't exceeded your total contribution basis, you should be fine. When you get to the FreeTaxUSA screen for entering your 1099-R, make sure you select "Roth IRA" as the account type. Then there should be a series of questions about whether this is a qualified distribution, early distribution, etc. Look for the question that asks if you're withdrawing contributions - this is where you indicate that your $5,000 came from contributions rather than earnings. The software should automatically generate Form 8606 Part III for you once you indicate this is a contribution withdrawal. Just make sure you have documentation of your total contributions over the years to verify that $5,000 doesn't exceed what you've put in. If you're unsure about your contribution history, check with your IRA provider - they usually track this information.

I feel for you - the uncertainty is the worst part! I went through a similar CP05 review last year after amending and it took about 6 months total, but I did eventually get my full refund. The key thing that helped me was staying organized with all my documentation and being patient (easier said than done, I know). One tip: if you haven't already, create an online IRS account so you can monitor your transcripts - look for any 846 codes which indicate refund processing. The fact that they acknowledged your amendment fixed the frivolous filing issue is definitely a positive sign. Try calling that 866 number they provided if you hit the 120-day mark with no updates. Hang in there - most people in your situation do get their refunds eventually! 🤞

I'm going through almost the exact same thing right now! Filed in March, amended in July, got my CP05 in October. The "frivolous position" thing freaked me out at first but my tax preparer explained it's usually something minor that gets flagged by their system. The good news is you avoided that huge penalty! I've been checking my transcripts weekly and calling every month or so. No movement yet but the IRS rep told me amended returns with CP05 letters are taking 4-6 months minimum this year due to staffing issues. I know the wait is killing you (trust me, I feel it too) but from everything I've read here and other forums, most people do eventually get their refunds. Keep your documentation ready and maybe try calling that number if you haven't heard anything by the 4-month mark. We got this! 💪

This is such a timely discussion! I'm dealing with a similar situation but with an added wrinkle - one of my partnerships changed their reporting method mid-stream. For the first two years, they reported my guaranteed payments in Box 5 as interest, but last year they switched to Box 4b without any changes to the partnership agreement. When I called to ask about the change, the partnership's accountant said they got advice that Box 4b was "more appropriate" for guaranteed payments for capital contributions, but couldn't give me specifics about what changed their analysis. This creates a headache for me because now I have inconsistent treatment across years for the identical economic arrangement. Has anyone dealt with a partnership changing their reporting approach? Should I be concerned about this inconsistency, or is it actually a correction that's beneficial in the long run? I'm also curious - for those who've spoken with IRS agents about this topic, did they indicate any preference for how partnerships should be reporting these payments? Or is it truly just a matter of reasonable interpretation based on the agreement terms?

I've been following this thread closely because I'm dealing with almost identical issues with my partnership investments. What strikes me is how much confusion exists even among tax professionals about the proper treatment of guaranteed payments for capital. One thing I'd add to this discussion is the importance of looking at the actual partnership agreement language. I've found that many partnerships use terms like "preferred return," "priority distribution," and "guaranteed payment" interchangeably, but they have very different tax implications. A true guaranteed payment under Section 707(c) is supposed to be determined without regard to partnership income - meaning you get paid even if the partnership loses money. If your payment is contingent on partnership profits, it's more likely an allocation that should go in Box 1, not a guaranteed payment in Box 4. For those dealing with PFIC issues, I'd strongly recommend getting professional help with the QEF elections. The timing and calculation requirements are incredibly complex, and mistakes can be costly. The excess distribution rules under Section 1291 are particularly punitive if you don't have a proper QEF election in place. Regarding the NIIT question - yes, both guaranteed payments for capital and interest income are generally subject to the 3.8% Net Investment Income Tax if you're not materially participating in the business. The "nonpassive" characterization on Schedule E doesn't exempt it from NIIT. Has anyone here dealt with partnerships that converted from domestic to foreign entities? I'm curious about the tax consequences of that conversion itself, separate from the ongoing PFIC issues.

Has anyone run into issues with banking or business operations by not having a Partnership Representative? We're trying to decide if we should just pay a US person to serve as our PR instead of opting out of BBA.

I've been through this exact situation with my EU-based business partner last year! The BBA opt-out was definitely the right choice for us, and it's much simpler than it initially appears. Just to add to what others have mentioned - when we opted out, we didn't face any complications with our tax treaty benefits. Our accountant confirmed that the opt-out actually made things cleaner since it eliminated the need for ongoing PR correspondence with the IRS. One thing I'd recommend is double-checking that your partnership income is properly classified. Since you mentioned having income from outside the US, make sure you understand whether any of it constitutes "effectively connected income" (ECI). If it's not ECI, you likely won't need to file individual Form 1040-NR returns, which simplifies things considerably. Also, keep good records of your opt-out election. We created a simple file with copies of Schedule B and Schedule B-2 from our 1065 filing, along with notes about why we qualified for the election. It gives us peace of mind for future years. The whole process ended up being much more straightforward than we anticipated. With your simple financial situation, you should be able to handle this without too much difficulty once you understand the opt-out mechanics.

I'm dealing with a similar situation right now! My employer said they'd have corrected W2s out "soon" back in February and it's now April. What I've learned from calling around is that while there's no specific deadline for W2c forms, the IRS does expect "prompt" correction once errors are discovered. Here's what worked for me: I called our payroll department and asked for the specific nature of the correction and an estimated timeline. Turns out mine was just a minor coding issue that wouldn't affect my refund at all. They told me I could file with the original W2 and just ignore the corrected one when it comes. If your employer won't give you details about what's being corrected, you might want to consider filing with your original W2 and amending later if needed. The longer you wait, the more you're potentially losing out on your refund or owing penalties if you end up owing taxes. At some point, the employer's delay becomes your financial problem, which isn't fair.

I completely understand your frustration! As someone who works in tax preparation, I see this situation way too often. While there's technically no hard deadline for corrected W-2s, "early March" turning into "end of March" is definitely unreasonable. Here's my practical advice: First, call your HR/payroll department TODAY and ask for two specific things: 1) What exactly is being corrected on the W-2, and 2) A firm date when you'll receive it. Don't accept vague answers like "soon." If the correction is minor (like a coding issue that doesn't affect your actual wages or withholdings), you can likely file with your original W-2 and ignore the corrected one. However, if it involves actual dollar amounts for wages, taxes withheld, or retirement contributions, you'll want to wait or file an amended return later. If they can't give you a firm timeline, I'd seriously consider filing with your original W-2 and amending later. You're losing potential refund money sitting in limbo, and if you end up owing taxes, you could face penalties for late filing. Your employer's inefficiency shouldn't cost you money or peace of mind.