Thanks for this advice! I just checked my bank account and the payment did go through about 10 days ago. That's a huge relief! I kept thinking there might be some official "approved" notification I was missing. Do you know roughly how long I should keep documentation for self-employment taxes?

You're welcome! Yes, that payment clearing is usually a good sign that everything is proceeding normally. Most people don't realize the IRS generally only contacts you if there's a problem. For self-employment tax documentation, you should keep all records for at least 7 years. This includes receipts, mileage logs, home office measurements, client invoices, and bank statements showing income and expenses. The IRS can typically audit returns up to 3 years back, but for some situations like substantial underreporting, they can go back 6 years or more.

So basically we just file and hope for the best? There's really no confirmation system at all? That seems messed up considering how serious they are about audits and penalties.

Do you need to get a new appraisal specifically for this, or can you use the appraisal from when you purchased the property? My purchase appraisal has a land value listed but it's way higher than what the tax assessment suggests.

You can absolutely use the appraisal from when you purchased the property, assuming it breaks out the land value separately from improvements. That's actually one of the best documents to use since it's specific to your property and was done around the time of purchase. If your purchase appraisal shows a higher land value than the tax assessment suggests, you can use either method - but the appraisal might be more accurate since tax assessments can sometimes be outdated. The key is to pick a reasonable method and be consistent. Just document your reasoning and keep the appraisal with your tax records in case of questions later.

Ohhhh that makes so much sense now! I was driving myself crazy trying to figure out why the numbers were so far off. Thanks for explaining this so clearly!

But doesn't the SECURE Act eliminate the stretch IRA approach you're describing? I thought that's what the 10-year rule was about - that I have to empty the account within 10 years now instead of spreading it over my lifetime. I'm so confused because different sources say different things!

You're right to be confused - the SECURE Act did eliminate the lifetime stretch for many beneficiaries, replacing it with the 10-year rule. However, there are exceptions based on when the original owner died and your relationship to them. Since your father died in 2022 and hadn't yet reached his required beginning date (age 72), you might still qualify for special treatment under certain circumstances. This is why your calculation seemed low - if you do qualify for the life expectancy method, you'll get a much smaller initial distribution than if you were simply dividing by 10 years. I'd recommend getting professional tax advice specific to your situation to confirm which method applies to you. The penalties for getting this wrong are significant (25% of the underpayment).

OMG yes! TD Ameritrade told me I had to take all the money out in 5 years, then Schwab said 10 years, and my tax guy said I could stretch it over my lifetime. I ended up requesting a private letter ruling from the IRS which cost me $10,000 but was worth it to get a definitive answer for my situation. The rules are so complicated now with all the SECURE Act changes.

Do you remember what specifically changed on Schedule C? I'm working on mine now and want to make sure I get it right.

The main differences weren't dramatic, but there were some COVID-related options that existed only for 2020 returns. For example, there were special provisions for the Employee Retention Credit and paid sick/family leave credits that appeared on that year's forms. The core expense categories stayed the same (advertising, car expenses, insurance, etc.), but some of the instructions and limitations were different due to pandemic relief provisions. Your best bet is to download the actual 2020 Schedule C form and instructions directly from the IRS website rather than using any current year references. That way you'll be working with the exact form as it existed then.

Not to mention the possibility of having to amend your state return too depending on where you live. Some states require you to file a state amendment if you change your federal return.

How quickly should I do the conversion after contributing? Mine sat for about 2 weeks and earned like $12 in interest. Is that going to cause issues?

A couple weeks is totally fine, and $12 in interest isn't going to cause major issues. You'll just need to pay taxes on that $12 when you do your 2024 taxes (since that's when the conversion happened). The real problems happen when people contribute to a traditional IRA and then wait months or even a year before converting, allowing significant earnings to accumulate. Some people have their traditional IRA in investments that could grow substantially before conversion, creating a larger tax bill.

I've used TurboTax for backdoor Roth for the past 3 years. It works but is a bit confusing. When it asks if you want to deduct your traditional IRA contribution, make sure to say NO. Then it will guide you through the Form 8606 for non-deductible contributions. The next year, it'll help you report the conversion with the 1099-R.