Do you know if the IRS is actively auditing claims right now? My brother used one of those ERC specialty firms and got almost $400k, but I'm worried he's going to end up owing it all back plus penalties.

Yes, the IRS announced earlier this year that they're significantly increasing audit activity specifically targeting ERC claims. They've actually paused processing new claims while they develop better fraud detection systems and have added staff specifically for ERC audits. If your brother used an ERC mill that made questionable eligibility determinations, he should seriously consider talking to a qualified tax professional immediately - not the firm that filed the claim. The IRS has stated they're focusing on claims that show "common indicators of non-compliance," and those $400k claims from businesses that didn't experience clear revenue drops or government shutdowns are prime targets.

This is unfortunately a common situation. Many of these ERC mills collected their fees and have now disappeared, leaving clients exposed to potential audit risk. As a tax professional, I would recommend: 1) Gather all documentation about how the firm determined you qualified. Did they provide a detailed eligibility analysis? 2) Consult with a reputable tax professional (CPA or tax attorney) who can review your specific situation and documentation. 3) If the determination was clearly improper, you might want to consider a voluntary disclosure to the IRS, though the formal program has ended. The IRS is most concerned with willful fraud. If you relied on what you believed was professional advice in good faith, that's a factor the IRS will consider, though it doesn't eliminate repayment obligation if you truly didn't qualify.

That makes sense! I noticed something similar with H&R Block software. Do you think it's safer to go with what the IRS forms calculate or what the tax software says?

In my experience, I've found that tax software like TurboTax is generally correct because it's applying all the rules comprehensively. The paper worksheets sometimes require you to go back and forth between multiple forms in a specific order, which is easy to mess up when doing it manually. If there's a significant difference though, I'd recommend double-checking your entries in the software to make sure everything is correct. Tax software can only be as accurate as the information you provide. Most major tax software is regularly updated to comply with current tax laws, so it's usually reliable if you've entered everything correctly.

That's actually really helpful! I did include my tuition costs, but I wasn't sure about some of my required course materials. Do textbooks count for the Lifetime Learning Credit? I thought those were only eligible for the American Opportunity Credit.

That's a great point I hadn't considered! My company does offer a 401k that I'm not fully maxing out yet. I'm putting in about 10% of my salary but could definitely increase that. We also have an HSA option I haven't been using. Would increasing 401k contributions now still help reduce my MAGI for the whole year, even though we're partway through 2024?

Yes, increasing your 401k contributions now will still help reduce your 2024 MAGI, even though we're partway through the year. Your MAGI calculation only looks at your total contributions for the year, not when during the year they were made. If you significantly increase your contribution percentage for the remaining months, you can make up for the lower contribution rate from earlier in the year. The HSA is another great option if you have a qualifying high-deductible health plan. The $4,150 contribution limit (for individual coverage) for 2024 comes straight off your MAGI calculation. Between maxing out your 401k and adding an HSA, you could potentially reduce your MAGI by enough to stay within the Roth contribution limits, avoiding the need to withdraw anything.

Thanks for clarifying the 5-year rule! One question though - if OP does the backdoor Roth conversion, doesn't that start a NEW 5-year clock for those converted funds? I'm trying to understand if there's any disadvantage to the backdoor approach versus direct contributions if you might need access to the money before 59.5.

Where exactly in H&R Block do you find this? I'm looking at that section right now and I don't see anything specific about "prior Roth contributions." Is it hidden in some submenu?

It's a bit buried in the interface. After you get to the "IRA, 401(k), or Other Retirement Plans" section, you need to click on the specific Roth IRA contribution entry. Then there should be an "Advanced" or "Additional Information" button or link. Click that and you'll see additional fields, including one for your previous years' contributions or basis amount. If you're using the desktop version rather than the online version, the navigation might be slightly different, but the concept is the same - look for an advanced or additional info section related to your Roth IRA entries.

I've been using TaxAct for years and have never seen any warning about Roth IRA basis. I wonder if this is just an H&R Block thing or if I've been missing something important all along?

That's impressive savings! Do you mind sharing what kinds of deductions they found that TurboTax missed? And approximately what you pay your accountant?

The biggest win was identifying that some of my investment advisory fees were deductible in a way I hadn't been taking advantage of. Also found some home office deductions related to my W-2 job during 2020-2021 that I qualified for but didn't know about. I pay about $850 annually for tax preparation and filing. But the real value comes from quarterly check-ins for tax planning - we make adjustments throughout the year instead of just at tax time. This costs about $1200 more annually, but the savings and peace of mind are worth it.

Agree 100%. I'm at $380k, all W-2 and investments like OP, and my accountant basically told me after 2 years that I didn't need him! Said TurboTax would do fine for my situation lol. Respectable honesty I guess?

Glad to hear I'm not alone! I appreciate the accountant who admits when they're not adding enough value. Most retirement accounts are pretty straightforward max contributions, and standard investment stuff isn't that complex. I think where accountants shine is with business ownership, real estate, or unusual situations like foreign income. For regular employees, even high-income ones, tax software covers most bases pretty effectively.