This is super helpful! One question though - if you've been making deductible Traditional IRA contributions for years and then make some non-deductible contributions before converting to Roth, do you only pay tax on the deductible portion? Or is it more complicated?

It's a bit more complicated. The IRS uses what's called the "pro-rata rule" for conversions. You can't cherry-pick which dollars to convert first. If you have both deductible and non-deductible contributions in your Traditional IRAs, you must calculate the percentage of your total IRA balance that represents non-deductible contributions. That same percentage of your conversion will be tax-free. For example, if 20% of your total IRA balance across all accounts represents non-deductible contributions, then 20% of your conversion would be tax-free.

I used TurboTax last year for this exact situation. It works but you need to be careful. When you enter your 1099-R, it initially shows the full amount as taxable. Later in the process, it will ask about non-deductible contributions and previous Form 8606 filings. Make sure you don't miss that section!

Thanks for the info! I was worried I'd miss something important. I'll keep an eye out for that section about non-deductible contributions. Did you have to pay for the premium version to access Form 8606?

Thanks for the warning! I hadn't even considered that possibility. I'll check with them to confirm they're not planning to send a corrected 1099 for 2024. Would definitely complicate things if they did.

Glad I could help! It's worth a quick email to their accounting department. In my case, they had sent the corrected 1099 without telling me, and it didn't arrive until after I'd already filed. So I had to amend my return, which was a whole ordeal. Better to know their plans upfront.

I did this in TurboTax last year. When you're filling out the Schedule C section, there's a part for "Other Expenses" where you can add a custom category. I labeled mine "Income previously reported on 2023 tax return" and entered the amount. The TurboTax interview doesn't specifically ask about this situation, so you have to know to add it yourself.

I didn't know the IRS could restrict your withholding choices! Has this happened to you or someone you know? How extreme would the withholding need to be for them to do this?

It's never happened to me personally, but I've seen it happen to a colleague. In their case, they were having about 50% of their check withheld when their actual tax liability would have only required about 15-20%. The IRS typically only issues lock-in letters when there's a significant discrepancy. For your situation, wanting a $12k refund on $150k income with 3 kids isn't extreme enough to trigger concern. It would be more problematic if you were trying to have, say, $40k withheld when your likely tax liability is only $15k. They generally don't mind reasonable overwithholding - many people use tax refunds as a savings method.

Do you know which states offer tax benefits for homeschooling? I'm in Illinois and considering homeschooling next year.

Illinois doesn't currently offer specific tax benefits for homeschooling expenses, unfortunately. States that do include Louisiana (deduction up to $5,000), Indiana (deduction up to $1,000 per child), Minnesota (education tax credit), and a few others. Even without state-specific benefits, don't forget about potential federal benefits like the Lifetime Learning Credit depending on how you structure your homeschooling program. Some families also set up small educational businesses alongside their homeschooling which can provide some tax advantages if done properly.

Would paying the invoice in full and then disputing it with my credit card company be a viable option? Or should I try to resolve directly with the firm first?

Always try to resolve directly with the firm first. Credit card disputes should be a last resort for several reasons. First, it creates a more adversarial relationship that might make negotiation difficult. Second, the firm could potentially send the unpaid amount to collections, which could affect your credit score. Third, you'll have a stronger case with your credit card company if you can show you made good-faith efforts to resolve the dispute directly. Document all communication attempts with the firm. If you reach an impasse after speaking with the managing partner or firm owner, then consider the credit card dispute as a secondary option. Make sure to include all documentation showing the lack of fee disclosure and your attempts to resolve the matter directly.

That makes sense. If specialized tax advice typically runs $300-600/hr but wasn't disclosed, do you think offering $150-200 is reasonable when a significant portion of the conversation was irrelevant basic information?

What about if I'm just selling through platforms like eBay or Mercari? Do I need to worry about sales tax stuff or do they handle all that? And do different states have different rules for when I need to start filing taxes?

For platforms like eBay and Mercari, they generally handle the sales tax collection and remittance for you in most states. This is because of marketplace facilitator laws that make the platform, not the individual seller, responsible for sales tax. So you don't need to worry about collecting or remitting sales tax when selling through those platforms. Yes, different states definitely have different filing thresholds. For example, states like California require filing if your income is over $19,310 (single filer), while other states like New Hampshire don't have income tax at all. Some states like Virginia require you to file if your gross income exceeds $11,950. It really depends on where you live, so you'll want to check your specific state's department of revenue website.

The $600 threshold is causing so much confusion. I sell vintage items I find at garage sales as a hobby and now I'm getting 1099s for the first time. But shouldn't I only be taxed on the profit, not the total sales? Like if I buy something for $10 and sell it for $50, I'm only taxed on the $40 profit, right?