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.

That's actually exactly what's happening - it's investment income from a stock sale. How did you prove to them that you did report it correctly? Did you have to send in a specific form or just explain it in the response letter?

I sent them a copy of the original 1099-B I received (the one I used when filing), along with my Schedule D and Form 8949 that showed I had reported the transactions. Then I explained in my response letter exactly which line items were being questioned and where they could find those exact amounts on my return. The key was being super specific and making it extremely easy for them to verify what I was saying. I literally wrote things like "The $12,345 amount referenced in paragraph 2 of your notice can be found on line 3 of my Schedule D, which matches line 1 of Form 8949 as shown on the attached documents." I basically created a roadmap that connected their questions directly to my filing documentation. That approach worked well because it minimized the work they had to do to verify my explanation.

100% agree! Those companies are predatory. My colleague went with one of the big national firms and paid $2,500 for them to basically fill out a form response. The commercials make it sound like they have some special relationship with the IRS but they absolutely don't. If you do need professional help, look for a local CPA or Enrolled Agent who specializes in tax controversy. They'll charge a reasonable hourly rate instead of those massive upfront fees, and you'll get personalized help from someone who actually looks at your specific situation.

Thanks for the warning! I actually got a call from one of those companies right after I got my letter (no idea how they knew?) and they wanted $2,800 upfront. Felt super sketchy so I didn't go with them. Good to know my instincts were right!

Thanks for mentioning this! I definitely made under $10k for the year, so maybe I'd qualify for that credit? And you're right - I never got any forms from the company, so maybe they didn't report it. Would that make my penalties less severe?

You should definitely check if you qualify for the EITC. For 2023, a single filer with no children could qualify with income up to about $17,640, so you're well within that range. This could potentially give you a refundable credit of several hundred dollars. Regarding the unreported income, it's a double-edged sword. If they didn't report it, the IRS might not know you were supposed to file, which means they haven't been actively pursuing you for non-filing. However, you're still legally obligated to report all income regardless of whether you received a 1099. The safest approach is always to file and report everything accurately, even if it's late.

Definitely good to know. I'm in Texas so I think we don't have state income tax, but I'll double check to make sure I'm not missing anything else!