Don't forget that if your income was only $5,500 in 2019, you were only eligible to contribute that amount (or your earned income, whichever is less) to your Roth IRA, not the full limit which was $6,000 that year. A lot of people miss this detail - you can only contribute up to 100% of your earned income if it's less than the annual limit.

Just wanted to add a few practical tips for filing your Form 5329s based on my experience with a similar situation: 1. Mail each Form 5329 separately with its own check for the penalty amount. Don't combine years into one envelope - it can cause processing delays. 2. Calculate interest on the penalties using the IRS underpayment rates for each quarter since the original due dates. You can find these rates on the IRS website. Include the interest payment with each form. 3. Keep detailed records of everything - copies of forms, payment receipts, certified mail receipts if you use them. The IRS processing times have been longer lately. 4. Consider getting a transcript of your account after filing to confirm everything was processed correctly. You can request these online through the IRS website. The good news is that by self-correcting, you're avoiding much harsher penalties that could apply if this were discovered during an audit. The 6% excise tax is really quite reasonable compared to other IRS penalties.

Why is farming treated so special in the tax code? I've had good and bad years in my construction business but nobody lets me average my income. Every year I get hit with big taxes when I have a good year.

Just to add some clarity on the mechanics - Schedule J essentially recalculates your tax liability by spreading your current year farm income across the current year plus the three preceding years. You take your elected farm income, divide it by 4, then calculate what your tax would have been in each of those years with that additional income. The key thing people miss is that you're not changing past returns or getting refunds for prior years. You're just using a different calculation method for THIS year's tax bill that accounts for the lumpy nature of farm income. One important limitation: you can only elect farm income averaging if your farm income this year is more than $2,500 AND you were engaged in farming in at least one of the three prior years. Also, the averaging only helps if you actually had lower income (and thus lower tax brackets) in those prior years. The IRS created this because farming is inherently volatile - drought, floods, disease, market crashes can wipe out years of work, then you might have one great year that pushes you into high tax brackets unfairly.

I recently went through this process and found a few cost-effective strategies that might help. First, check if your employer has any partnerships with financial services - some larger companies have relationships with CPAs or financial advisors who can provide verification at discounted rates for employees. For real estate, I discovered that if you have a HELOC (home equity line of credit) that was recently approved, the bank's valuation from that process is often acceptable to CPAs for verification purposes. This saved me from paying for new appraisals since I had refinanced within the past year. Another tip: if you're borderline on qualification, consider the timing of your verification. Some CPAs will look at your most recent tax filing plus current year-to-date income if it shows a clear pattern of meeting the threshold. This can be especially helpful if you had a strong Q4 or recently got a raise. Also, don't overlook investment accounts you might forget about - old 401(k)s from previous employers, IRAs, taxable brokerage accounts, etc. Sometimes these add up to more than you realize and can push you over the net worth threshold without needing real estate appraisals at all. The whole process cost me under $300 using a CPA who specialized in this type of verification, and I was able to use the same letter for three different investment opportunities over the next few months.

One thing I haven't seen mentioned yet is the importance of organizing all your financial documents before reaching out to any CPA or verification service. This can significantly speed up the process and potentially reduce costs. Create a comprehensive folder with: recent tax returns (last 2 years), all investment account statements (as of the most recent quarter), bank statements showing liquid assets, any recent property valuations or refinance documents, and documentation of other assets like business ownership interests. Having everything organized upfront allows the CPA to quickly assess your best qualification path rather than going back and forth requesting additional documents. In my experience, CPAs often charge less when they can complete the verification efficiently in one session rather than having to revisit your case multiple times. Also, if you're working with any of the services mentioned like taxr.ai, having your documents ready for upload will get you results much faster. The more complete your financial picture is from the start, the better they can analyze your optimal qualification strategy. One last tip: take photos or scans of everything even if you think you won't need it. Sometimes CPAs spot opportunities in documents you didn't think were relevant - like that old stock option exercise or investment property purchase that pushes you over the threshold.

6 Question for anyone who's done this - do you need a special type of solo 401k plan to make employer contributions? My financial advisor set up my solo 401k last year but never mentioned anything about employer matching. Do I need to change my plan?

14 As a newcomer here but someone who went through this exact decision process last year, I can confirm that maxing out both employee and employer contributions to your solo 401k is absolutely the way to go for tax efficiency. What helped me understand this was breaking down the numbers: if I took $25,000 as an S-corp distribution to invest in a taxable account, I'd pay income tax on that $25,000 first (let's say 22% = $5,500), leaving me with $19,500 to invest. Then I'd pay taxes annually on dividends and capital gains. But if I make that same $25,000 as an employer contribution to my solo 401k, it reduces my S-corp's taxable income dollar-for-dollar, meaning I save that entire $5,500 in taxes upfront. Plus the money grows tax-deferred. The only real consideration is liquidity - make sure you have adequate emergency funds in accessible accounts first. But for retirement savings specifically, the 401k route beats taxable investing by a wide margin when you run the math.

Tax pro here. This is absolutely a systemic change in IRS processing this year. The 570/971 combo is their standard procedure when a return gets flagged for verification. What's different in 2024 is the volume and the targeting criteria. They're focusing heavily on returns with credits, income disparities from previous years, and self-employment income. Most will clear automatically. Don't call unless your 570 has been there more than 45 days. And definitely don't file an amended return while these codes are active - that will only delay things further.

This is incredibly helpful - thank you everyone for sharing your experiences! I just checked my transcript this morning and sure enough, there's a 570 code dated yesterday. I was about to panic until I found this thread. Based on what I'm reading here, it sounds like this is just part of their new verification process this year. I do have both W-2 and 1099 income like @Tasia mentioned, so that might be what triggered it. Going to follow @Ellie's advice and wait it out rather than calling immediately. Will keep an eye on the mail for any notices. It's such a relief to know this is happening to so many people and most are getting resolved within a few weeks. I'll update this thread if anything changes with my situation!