So you're saying I shouldn't worry yet? When should I start to panic if I don't see movement? It's already been 3 weeks since I filed and the tracker still just says it's being processed with that PATH Act message.

You definitely shouldn't worry yet! The PATH Act hold means nothing will happen until after February 15th at the earliest. Even then, it can take another 5-7 business days for your return to finish processing and the refund to be approved. I'd say don't start getting concerned until around March 15th. If you haven't seen any movement by then, you might want to contact the IRS to see if there's an additional issue. But right now you're still well within the normal timeframe, especially considering this year's processing volumes. The "being processed" message with the PATH Act reference is exactly what you should be seeing at this point.

Unfortunately, amended returns with EIC are subject to even longer delays. They not only get caught by the PATH Act hold, but amended returns typically take 16-20 weeks to process regardless. And that's during normal times - with current IRS backlogs, some people are waiting 6+ months for amended return processing.

Is there an easy way to figure out the fair market value? I converted my property in September and I'm not sure how to establish what it was worth at that specific time.

There are several ways to establish fair market value at conversion. The most accurate would be to get an appraisal, but that costs money. Less expensive alternatives: You can check comparable home sales in your area from around the conversion date. Real estate websites like Zillow or Redfin often show recent sales data, though these aren't perfect. Another option is to look at your property tax assessment if it's relatively recent and your county assesses at or near market value (some counties assess at a percentage of market value, so you'd need to adjust accordingly). If you purchased the property within 1-2 years of conversion, you might be able to use the purchase price with some adjustments for market changes since then. Whatever method you choose, document your reasoning and keep records of how you determined the value. The IRS may ask for this if you're ever audited.

Great point on the separate account. I've been running all my rental stuff through my personal checking account and it's already becoming a mess trying to sort what's what. Did you set up a business account or just a separate personal account?

That's an interesting approach I hadn't considered! Do you know if there would be any additional tax implications I should be aware of with this method? And would I still be able to claim the standard mileage rate for the personal use of my vehicle on other schedules?

If you go the lease route, you'd be treating the vehicle as rental property on your Schedule E, so you'd need to track and deduct actual expenses rather than using the standard mileage rate. You'd report the lease income from the partnership, then deduct expenses like depreciation, insurance, maintenance, and fuel based on business percentage use. For the portion of your vehicle used personally, you wouldn't be able to claim any deduction since that's considered personal use. The standard mileage rate wouldn't apply once you've chosen to treat the vehicle as rental property. This approach works best for newer, more expensive vehicles where actual expenses exceed what the standard mileage rate would provide.

That approach won't work anymore. Employee business expenses were eliminated as deductions for most people with the Tax Cuts and Jobs Act of 2017. Unless you're in certain specific professions (like armed forces reservists, qualified performing artists, etc.), you can't deduct unreimbursed employee business expenses on your personal return.

What exactly is the pro-rata rule? I've been doing backdoor Roth for 2 years but have an old traditional IRA with about $30k in it. Should I be worried?

Yes, you should definitely be concerned. The pro-rata rule means you can't just convert your non-deductible contributions tax-free if you have other pre-tax IRA money. The IRS looks at all your IRA accounts (traditional, SEP, SIMPLE) as one big pot when you do a conversion. The taxable portion is calculated based on the ratio of pre-tax money to the total IRA balance. So if 80% of your total IRA money is pre-tax, then 80% of any conversion will be taxable regardless of which specific dollars you're converting.

TurboTax actually handles this pretty well but it's not obvious. You need to go to the IRA contributions section and make sure you select "nondeductible contributions." It'll then walk you through Form 8606. Just make sure you indicate which tax year the contribution was for. For the conversion, that goes in a separate section under "IRA distributions.

That's a good point. They're planning to retire in about 8-10 years, and I think their retirement income will put them around the 22-24% bracket based on their pension and expected 401k/IRA withdrawals. So it sounds like pre-tax contributions still make sense now, especially in 2023 if they're in the 24% bracket. But doesn't that still leave the question of whether to do the SEP for 2023 vs. prioritizing backdoor Roth going forward? The SEP would block backdoor Roth unless we convert it (paying taxes again).

If their retirement tax bracket is expected to be 22-24%, then yes, pre-tax contributions make sense now, especially while they're still in the 24% bracket. For your specific question about 2023 SEP vs. future backdoor Roth, I'd recommend a hybrid approach. Have your dad make a SEP contribution for 2023, but perhaps not the full $12,889. He could contribute just enough to keep him from spilling into a higher bracket. This gives some tax savings now while limiting the amount that would affect future backdoor Roth conversions. Then for 2024 and beyond, focus on maxing out his employer 401k (including any after-tax contributions for mega backdoor Roth) before considering backdoor Roth IRA strategies. The 401k contributions would give him the pre-tax benefit without the pro-rata complications of the SEP.

This is a really good point about being near the bracket edge. Moving from 24% to 32% is an 8% jump which is huge. If a $12,889 SEP contribution could keep them in the lower bracket for 2024, that would save significantly more than just the direct tax benefit on the contribution itself.

That's actually a fantastic point I hadn't considered! They're definitely near the edge of the bracket - I think my mom estimated they'll be about $15-20k over the 24% threshold for 2024 without any additional deductions. So a $12,889 SEP contribution for 2023 wouldn't directly affect 2024 taxes, but it would free up cash they could use for other deductions or opportunities in 2024. I'll definitely bring this up with them - maybe they could increase 401k contributions enough in 2024 to stay in the 24% bracket if they preserve more cash now with the SEP contribution for 2023. Thanks for this perspective!