I wish I had thought of that earlier! Unfortunately I don't have any of those old paystubs either. I've been terrible about keeping records and my old email account from back then was deactivated. I'm definitely learning my lesson about keeping important tax documents for longer periods!

That's too bad about the paystubs. For future reference, the IRS recommends keeping tax records for at least 3 years, but in cases where you might have special deductions or complicated situations, 7 years is safer. I've started keeping all my important tax documents in a dedicated cloud storage folder so I can access them from anywhere and don't have to worry about losing paper copies. Might be worth setting up something similar going forward so you don't run into this issue again.

The SSA can provide an earnings record, but it won't show tax withholding amounts which is probably what the auditor needs. Their records only show your income amounts reported by employers for Social Security purposes. The IRS transcript is definitely more useful since it shows the complete W-2 information including all withholding.

Would the original poster need to file business returns separately from personal returns? And what about sales tax - is that a completely different process? I'm confused about how all these different tax types get resolved.

Based on the description, it sounds like the business was likely a sole proprietorship or single-member LLC, which means business income would be reported on Schedule C of the personal return. So the CPA would prepare personal returns (Form 1040) with business schedules attached for each year. Sales tax is indeed a separate process handled at the state level. The CPA would need to prepare and file sales tax returns for all unfiled periods. This is separate from income tax filings but should be addressed simultaneously since the state has already started collection actions. Most tax resolution CPAs can handle both income and sales tax matters, but it's worth confirming this specifically when hiring someone.

Good point about penalties. I think with the substitute return already filed, doesn't that mean some penalties are already assessed? Is it harder to get abatement after that point?

I fortunately don't have any other traditional IRA assets - I've always used my 401k for pre-tax retirement savings and only opened the traditional IRA temporarily for the backdoor process. So I think I'm ok on the pro-rata rule, but that's definitely an important point for others to consider. Actually, I'm wondering if there's any advantage to purposely waiting until the market goes up before doing the conversion next time? That way I could potentially use up some of this basis carryforward?

Intentionally waiting for the market to go up before converting could help use up your basis carryforward, but it comes with risks. The longer you wait to convert, the more potential tax liability you could create if investments grow substantially before conversion. Remember that any growth that occurs while the money sits in the traditional IRA will be taxable when you convert. So while waiting might help with the basis issue, it could create a different tax problem. Most financial advisors recommend doing the conversion quickly after contribution to minimize taxable growth. It's usually a better strategy to just continue with regular backdoor contributions and let the basis work itself out over time rather than trying to time the market for tax purposes.

The basis carryforward calculation happens on Form 8606. If you contribute $6,000 (non-deductible) to a traditional IRA but the value drops to $5,500 before you convert to Roth, you'll have: - Line 5: $6,000 (your non-deductible contribution) - Line 8: $5,500 (the amount you actually converted) - Line 9: $0 (assuming no previous basis) - Line 10: $6,000 (from line 5) - Line 11: 1.000 (divide line 10 by line 8, but capped at 1.000) - Line 13: $5,500 (line 8 × line 11) - Line 14: $500 (line 10 minus line 13) That $500 on line 14 is your basis carryforward to next year's Form 8606.

Thanks for pointing this out! Of the 26% non-rental time, we probably used it personally for about 20 days total throughout the year. The rest was just vacancy between bookings. Does that change how I should handle the depreciation?

Since you used it for 20 days personally and that's less than both 14 days and 10% of your rental days, you're still in the clear to treat it as a regular rental property. Your depreciation calculation remains the same - you can deduct 74% of the annual depreciation amount. Remember though, when allocating other expenses like utilities and maintenance, you'll need to use the 74% factor consistently. And keep good records of personal use days versus rental days versus vacant days, as the IRS might ask for this documentation if you're ever audited.

Is that true for 2024 taxes? I thought there was still a $600 threshold before they send a 1099-K?

Thanks for mentioning this! The letter does have a notice number (CP504) and there's info about appeal rights. I looked it up and CP504 is a "Final Notice of Intent to Levy" which is freaking me out even more. Does this mean they're about to take money from my accounts?

A CP504 is indeed a legitimate IRS notice and it's basically warning you that they may levy (seize) your assets or tax refunds if you don't address the debt. However, it's not actually the final notice before levy despite what the title suggests. Before they can actually levy your bank accounts or wages, they must send you a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing" (Letter 1058 or LT11) and give you 30 days to request a Collection Due Process hearing. The CP504 is serious, but you still have time and options before any levies would occur. This would be a good time to contact the IRS to discuss resolution options like a payment plan or making a dispute if you believe the assessment is incorrect.

For the "Currently Not Collectible" status, what kind of documentation do they require? I've been unemployed for 9 months and there's no way I can pay my tax debt.