I've been through this nightmare before with a client who had similar balance sheet issues. Here's what worked for me: First, get your hands on every bank statement, loan document, and financial record you can find for the past 3-4 years. You need to trace where that $668K actually went. In my case, it turned out to be a combination of unrecorded asset purchases, informal loans to shareholders that were never documented, and some legitimate distributions that just weren't recorded properly. The approach I took was similar to what Owen suggested - I created a comprehensive reconciliation showing the flow from the incorrect prior year balances to what they should have been, then made a single adjustment in the current year. I included a detailed memo with the return explaining the nature of the corrections. One thing I'd add: before you do anything, have a frank conversation with the client about what transactions actually occurred. Sometimes owners know exactly where the money went but the previous accountant just didn't record it properly. Other times, there are skeleton in the closet that need to come out before you can fix anything. Also, consider the state tax implications if you're in a state that follows federal S-Corp treatment. Some states have their own rules about how balance sheet corrections should be handled. The good news is that if this is truly just accounting errors with no additional tax owed, the IRS is usually reasonable about letting you fix it going forward rather than reopening multiple years.

I've been following this thread and wanted to add some practical insights from dealing with similar situations. The $668K discrepancy is definitely significant, but you're right to be cautious about not creating unnecessary complications. Before making any adjustments, I'd strongly recommend doing what I call a "cash flow autopsy" - trace every major cash movement for the past 2-3 years through bank statements. Look for patterns like regular payments to owners, large equipment purchases, loan proceeds, or asset sales that might explain the discrepancy. One thing I've learned is that these situations often involve multiple issues layered together. You might find $200K in unrecorded distributions, $300K in equipment purchases that were expensed instead of capitalized, and $168K in other accounting errors. Each piece needs to be handled appropriately. For the correction approach, I agree with Owen's bridge schedule method. Create a clear audit trail showing how you arrived at the corrected balances. The IRS appreciates transparency, and if you can demonstrate that the corrections don't result in additional tax liability, they're usually reasonable. One additional consideration: make sure to review the shareholders' basis calculations. If there were unreported distributions in prior years, their basis tracking might be off too, which could affect future distributions or loss limitations. Document everything thoroughly and consider having the client sign off on your methodology before filing. This protects both of you and shows good faith effort to correct the records properly.

I'm really sorry you're dealing with this - it's unfortunately all too common with these tax resolution companies that prey on people's desperation to fix their tax problems. Based on what you've described, this company is displaying classic signs of a predatory tax resolution firm. The refusal to provide itemized billing, blocking communication with your accountant, and constantly asking for more money without concrete results are major red flags. Here's what I'd recommend as your immediate next steps: 1. **Get your Tax Account Transcript** - As mentioned by others, this will show you exactly what's been filed (or not filed) on your behalf. You can get this free at IRS.gov or by calling 1-800-908-9946. 2. **Send a certified letter** terminating their services and demanding all your documents back. They're legally required to return your files. 3. **File complaints** with your state's attorney general, the Better Business Bureau, and the IRS using Form 14157. 4. **Consider contacting the IRS directly** - Many people are surprised to learn that IRS agents can be quite helpful when you reach them directly. You might qualify for a simple installment agreement or other relief programs. Don't let this company continue to drain your finances. At $12,000+ with no results, you've already paid more than many people's entire tax debt. You can absolutely resolve this situation without them, and there are legitimate resources available to help you do it affordably. You're not alone in this, and it's not your fault that you trusted what seemed like professional help.

Hassan, I'm so sorry you're going through this ordeal. What you've described is textbook predatory behavior from these tax resolution mills - the vague updates, refusing documentation, blocking your accountant, and constantly asking for more money are all classic red flags. As a senior who's dealt with IRS issues myself, I want you to know that you have more power than they want you to believe. The fact that they won't communicate with your independent accountant is particularly telling - legitimate tax professionals welcome transparency and collaboration. Here's what worked for me when I was in a similar situation: **Immediate action items:** - Send that certified letter terminating services (as Victoria mentioned) - Request your Tax Account Transcript from IRS.gov - this will show you the truth about what's actually been filed - Document every interaction you've had with them moving forward **The reality check:** At $12,000+ with zero progress, you've likely already paid more than what most people owe in back taxes. These companies count on you feeling overwhelmed and dependent on them, but the IRS actually has reasonable payment options when you work with them directly. Don't let them make you feel like your situation is uniquely complex - it's their business model to keep you paying indefinitely. You deserve honest help, not empty promises. Stay strong, and please keep this community updated on your progress. We're rooting for you.

Just wanted to mention that even though Box 12 codes are important, don't forget to look at your Box 13 too. If you're contributing to TSP, the "Retirement plan" box should be checked. This affects whether you can deduct traditional IRA contributions if you have those as well.

I went through this exact same confusion when I first started dealing with military W2s and TSP withdrawals. One thing that really helped me was creating a simple checklist to make sure I didn't miss anything: 1. **Box 12 codes** - Write down each code and amount, then look up what each one means 2. **1099-R from TSP** - This is separate from your W2 and shows your withdrawal details 3. **Box 13 retirement plan checkbox** - Make sure this aligns with your TSP participation 4. **Early withdrawal penalties** - Check if you qualify for any military exceptions The key thing to remember is that your Box 12 amount and your TSP withdrawal are two completely different things that get reported differently on your tax return. Box 12 shows contributions that were made, while the 1099-R shows money you took out. I'd also recommend keeping copies of all your military tax documents in one folder - you'll thank yourself later if you ever need to reference them for future tax years or if the IRS has questions.

Has anyone used the Form 8606 for reporting this kind of partial conversion? My accountant said I need to fill this out to show the taxable portion of my rollover but I'm completely lost on how to complete it properly.

I went through this exact same situation last year and it was definitely confusing at first! Here's what I learned from my tax preparer and some research: The key is understanding that your employer's traditional contributions were never taxed when they went into your 401k, so when you roll them to a Roth IRA, that's essentially a conversion that triggers taxable income. Your personal Roth contributions that show in Box 5 are fine since you already paid taxes on those. What helped me was creating a simple spreadsheet tracking my contribution history. I went back through my pay stubs and 401k statements to identify exactly how much my employer contributed as traditional (pre-tax) money versus my own Roth contributions. This gave me the exact amount I needed to report as taxable conversion income. Most tax software will handle this once you know the amounts - look for the section on "partial rollovers" or "mixed traditional/Roth distributions." You'll enter the total rollover amount, then specify how much was already taxed (your Roth portion) versus how much needs to be taxed now (employer traditional portion). Don't skip this step - the IRS will eventually catch discrepancies between what your 1099-R shows and what you report, and it's much easier to get it right the first time than deal with notices later!

Everyone keeps mentioning accountants, but I think you need a tax attorney for a situation this complex. I made the mistake of just using my regular CPA when I hadn't filed for 5 years, and we ended up with the IRS rejecting the voluntary disclosure and hitting me with serious penalties. An attorney can give you protection through attorney-client privilege that a CPA can't. Just my 2 cents after learning the hard way.

I was in a very similar situation - didn't file for 4 years with my consulting LLC. The key thing that helped me was getting organized BEFORE meeting with a tax professional. I spent weeks trying to reconstruct my financial records from old bank statements and whatever receipts I could find. One practical tip: if you used business credit cards or had dedicated business bank accounts, those statements will be your lifeline for reconstructing deductible expenses. Even without receipts, you can often identify legitimate business expenses from the merchant names and dates. Also, don't panic about the penalties. Yes, there will be some, but the IRS has programs like "first-time penalty abatement" that can help reduce them if you have a clean record otherwise. The fact that you're proactively addressing this before they contact you works heavily in your favor. For your income jump to $650k this year - make sure you're making quarterly estimated payments NOW if you haven't already. That's probably more important than the back years at this point since the current year liability will be substantial. Start gathering your records immediately and find a tax pro who specializes in unfiled returns. Don't let this drag on any longer - every month you wait adds more penalties and interest.