Thanks for this suggestion! My income is actually within the Roth IRA eligibility range but below the higher threshold. I was trying to diversify between pre-tax and post-tax retirement savings, but if I can't deduct the Traditional IRA contributions anyway, switching to Roth IRA might make more sense. Would there be any advantage to keeping non-deductible Traditional IRA contributions rather than just going with the Roth IRA directly?

If you can't deduct your Traditional IRA contributions and you're eligible for a Roth IRA, there's generally little advantage to making non-deductible Traditional IRA contributions instead of contributing directly to a Roth IRA. The main exception would be if you're planning to use the "Backdoor Roth" strategy in the future. Some people make non-deductible Traditional IRA contributions and then immediately convert them to Roth. This can be useful for those who exceed the Roth IRA income limits. However, this gets complicated if you already have other pre-tax money in Traditional IRAs due to the "pro-rata" rule.

I used TurboTax this year with the exact same retirement setup (Roth 401k + Traditional IRA), and it also said my Traditional IRA wasn't deductible because I participate in a workplace plan. So I think all the major tax software follows the same IRS rules on this.

How exactly does the SEP IRA thing work? Is it complicated to set up? And what percentage should I be setting aside if I don't want to get hit with this kind of bill again?

A SEP IRA is pretty straightforward to set up - most major brokerages (Vanguard, Fidelity, etc.) can help you open one in about 20 minutes online. You can contribute up to 25% of your net self-employment income or $66,000 for 2023, whichever is less. It directly reduces your taxable income dollar-for-dollar, which is huge. For setting aside money, I'd recommend 30-35% of every payment you receive. I actually have a separate savings account called "Tax Fund" where I immediately transfer that portion whenever I get paid. It seems high, but it covers both income tax and self-employment tax. If you're in a state with income tax, you might want to bump that to 35-40%. It's better to have a little extra saved than not enough when tax time comes around.

I've used both and honestly found TurboTax Self-Employed to be more thorough for 1099 income. It asks more specific questions about potential business deductions and seemed to find more write-offs. It's more expensive but worth it IMO.

Do you have any tips for what counts as "reasonable cause"? Would my scenario qualify? And did you just include the letter with your late return or file first and then send the letter separately?

Reasonable cause includes things like serious illness, death in the family, natural disasters, or inability to access records. Your family emergency might qualify depending on the specifics. The more documentation you can provide, the better. I filed my return first (to stop additional penalties from accruing) and then sent the reasonable cause letter separately. I referenced my return and included my tax ID number. Keep the letter concise but include specific dates and explain exactly how the situation prevented you from filing on time.

Not always true! My brother got hit with almost $1200 in penalties for missing his extended deadline last year. Depends a lot on your specific situation and how much you owe.

This is really helpful, thanks! Do you think it would be worth meeting with a CPA for just a consultation to get set up properly, then maybe using software to actually file? And do you have any tips on finding a decent CPA who won't charge an arm and a leg?

A consultation with a CPA is definitely a smart middle ground. Many offer an initial meeting at a reduced rate or even free. This gives you professional guidance on setting up your books and understanding what expenses to track, without the full cost of having them prepare your return. For finding an affordable CPA, I'd recommend asking other small business owners in your area for recommendations. Also look for smaller firms or solo practitioners rather than larger firms, as they often have more competitive rates for small businesses. Some CPAs even offer special rates for startups or businesses that lost money. Don't be afraid to call around and ask about their fee structure - most are very transparent about costs.

TurboTax actually has a business version that handles LLCs pretty well. It's more expensive than the basic version but WAY cheaper than a CPA. It walks you through all the business questions and helps with categorizing expenses properly.

Does filing that form actually work? I'm worried about creating bad blood with my former employer if I report them, but I also really need my tax documents.

Filing Form 3949-A definitely gets results in most cases. The IRS takes these reporting failures seriously because they affect tax compliance across the board. You can actually mention to your employer that you're considering filing this form before you actually do it - often just the knowledge that you're aware of your rights and the reporting process is enough to motivate them. As for creating bad blood, I understand the concern, but remember that they're legally required to provide these documents. You're just asking them to fulfill their legal obligation, not doing anything unreasonable. Your financial well-being and tax compliance shouldn't be compromised because they're dragging their feet.

I tried doing this but the IRS website is so confusing. Is there a specific section where I can find tax documents that have been filed? I created an account but can't find my way around.