Do other tax filing services do this too? Or is this just a TurboTax thing? I'm trying to decide which service to use next year.

Most of the major tax filing services do something similar if you choose to pay your filing fees from your refund. H&R Block, TaxAct, and TaxSlayer all use a similar bank transfer system and charge an additional fee ($35-$45 range). The only way to avoid these fees completely is to pay for the tax software upfront when you file. Some completely free options like FreeTaxUSA charge much less for their premium versions ($15-$20), so even paying upfront is more affordable than those refund transfer fees. Credit Karma Tax (now called Cash App Taxes) is completely free for federal and state, but it doesn't offer the option to pay from your refund since there's no fee to begin with.

Yep, it's a pretty slick way for them to make extra $$. The worst part is they don't make it very clear during the filing process. It's usually buried in the fine print or shown as a "convenience fee" or "refund processing fee" in a way that doesn't really highlight what's happening.

Thanks for breaking it down so clearly. For the investment portion - do short-term and long-term capital gains both count as "investment income" for this purpose? Also, if my investment income is less than the allocated interest, can I really carry forward the excess to future years?

Yes, both short-term and long-term capital gains count as investment income for the purpose of deducting investment interest. This includes all the investment income reported on your Schedule B, D, and similar forms. The carryforward provision is one of the most valuable aspects of investment interest expense. If your investment interest expense exceeds your net investment income in the current year, you can definitely carry forward the unused portion indefinitely to future tax years. You'll use Part II of Form 4952 to track this carryforward. Many investors actually plan around this, knowing they can use the deduction in future years when they have larger capital gains or other investment income.

That's not quite how it works. The "payment allocation" rules let you choose which loan you're paying when you have multiple loans, but they don't let you magically convert non-deductible interest to deductible. The IRS traces interest based on the USE of the money, not which part of the loan you claim to be paying off first.

Thanks for clarifying! I must have misunderstood what my accountant was saying. So there's really no way to optimize the allocation to increase the deductible portion? Sounds like I'm stuck with the original percentages based on how I used the funds.

7 Does the Wage and Income Transcript show state tax withholding too? Or just the federal stuff? I'm worried about both returns.

11 The Wage and Income Transcript only shows federal information, not state withholding. That's an important limitation to be aware of. For state withholding information, you'll need to contact your state tax agency directly to see if they offer a similar transcript service. Some states do have their own wage reporting systems, but it varies widely. You might need to use your federal transcript plus your bank records to make a reasonable estimate for your state withholding if you can't get the actual W-2.

1 I hadn't thought about contacting the payroll company directly! That's a great idea. I think they use some service called Payday or something similar... I'll have to ask my coworker. Would I need specific login information or can they look me up by SSN?

Does this pro-rata rule apply even if the other traditional IRA is with a different company? Like if my backdoor Roth is with Vanguard but I have an old IRA at Fidelity?

Yes, the pro-rata rule applies regardless of where your IRA accounts are held. The IRS doesn't care if they're at different institutions - they look at the total of all your traditional, SEP, and SIMPLE IRAs combined when calculating how much of a conversion is taxable. It's one of the most common mistakes people make with backdoor Roth conversions. The only way around it is to either convert all your pre-tax IRA money (and pay the taxes), or if you have a 401k that allows it, roll your pre-tax IRA funds into the 401k before doing the backdoor Roth process.

I used TurboTax last year for my backdoor Roth and it worked fine, but you have to be careful about how you enter everything. Make sure you indicate that your Traditional IRA contribution was non-deductible. There's a specific section for Form 8606 in TurboTax where you'll report both the contribution and conversion.

Thanks for sharing your experience! I'll look for that Form 8606 section specifically. Did you find that TurboTax explained the process well, or did you need to already understand what you were doing?

That's a good point, but isn't the higher standard deduction also part of TCJA and set to expire? So wouldn't the standard deduction also go back down in 2026, making itemizing more likely again?

You're absolutely right - I should have mentioned that. The increased standard deduction is indeed part of TCJA and scheduled to expire after 2025. Pre-TCJA, the standard deduction was much lower (around $12,700 for married filing jointly in 2017, adjusted for inflation). If no legislation is passed, the standard deduction would indeed drop significantly in 2026, which would make itemizing deductions beneficial for many more taxpayers. So the combination of lower standard deduction, unlimited SALT deductions, and higher mortgage interest cap could create a substantial change in tax strategy for homeowners in high-tax states.

The $750k mortgage interest deduction limit is per return, not per person. So on a joint return, your total limit is $750k regardless of how many borrowers are on the mortgage. If you file separately, each spouse gets a $375k limit. This is also true for the pre-TCJA $1M limit that would return after 2025 if no new legislation passes. On a joint return it would be $1M total, or $500k each if filing separately.