Filing your 2024 taxes shouldn't be directly affected by your unfiled 2021 return. Each tax year is technically treated separately. The IRS system won't automatically block you from e-filing your 2024 return just because 2021 is missing. However, there can be indirect effects. If you're claiming certain credits or deductions in 2024 that relate to prior year information, there could be verification issues. Additionally, if the IRS has already started sending you notices about your unfiled 2021 return, it's best to address that situation promptly rather than filing a new year while ignoring the past issue.

Yeah the IRS got a funding boost recently and they've been upgrading their systems to better track unfiled returns. They're definitely sending more notices out. But I've heard they're still prioritizing high-income non-filers over people who made under $25k. They go where the money is!

Is there a specific form the IRS uses to collect this financial information? I'm dealing with a different tax issue but also need to show my financial situation.

Yes, the IRS typically uses Form 433-A for individuals or 433-B for businesses to collect financial information when setting up payment plans or considering settlements. It's extremely detailed - asks about all income sources, expenses, assets, and liabilities. They may also request supporting documentation like bank statements and pay stubs. I recommend starting to compile this information early because it can take time to gather everything. Also, be completely honest on these forms - the IRS can verify much of this information, and additional dishonesty at this stage would only make your situation worse.

This is the best advice here. The distinction between poor documentation and intentional fraud is HUGE in the eyes of the IRS and the law. Let your attorney frame the situation appropriately.

Thank you so much for this warning. I definitely would have just blurted everything out in panic if I hadn't read this. I'll make sure to let the attorney handle all communication and not volunteer anything about what I was thinking or intending. I've contacted a tax attorney who specializes in these cases and have an appointment tomorrow morning. I'm going to bring copies of all the audit letters and my previous tax returns. Should I prepare anything else for this first meeting?

How do you check your transcript? Is that something on the IRS website?

Yes, you can access your tax transcripts through the IRS website by creating an account at irs.gov/account. Once logged in, you can request various transcript types - the "account transcript" is most useful for tracking audit status as it shows all activity on your account. If you're not tech savvy or have trouble with the online verification, you can also request transcripts by mail using Form 4506-T, but obviously that takes longer to receive.

I tried calling the number on my audit letter but keep getting voicemail. Is it worth leaving messages or is there a better time to call?

Thanks so much! That's super helpful. One more question - did you have to do anything special to indicate that you made contributions for two different tax years in the same calendar year? That's the part I'm most worried about messing up.

For contributions to different tax years, you report the contribution for the previous tax year on that year's return (so your 2023 contribution would be on your 2023 return), but all conversions go on the return for the year when they actually happened. If you already filed your 2023 return without reporting the contribution, you'll need to amend it. In FreeTaxUSA, go to the "Amend 2023 Return" option from your account page. Then both conversions will be reported on your 2024 return since they both happened in 2024.

You're in the ideal situation for a backdoor Roth! With no existing Traditional IRA balances, you don't have to worry about the pro-rata rule. It is indeed as simple as: 1. Report the nondeductible Traditional IRA contribution 2. Report the conversion to Roth Since you have no pre-tax money in any Traditional IRAs, your conversion will be tax-free (except for any earnings between the contribution and conversion). The pro-rata headaches only come into play when you have existing pre-tax money in Traditional IRAs. Consider yourself lucky!

This is super helpful! I just checked and you're right - it looks like TurboTax is calculating my Qualified Business Income deduction completely differently than FreeTaxUSA. That seems to be where most of the discrepancy is coming from. Now I just need to figure out which one is correct...

The Qualified Business Income (QBI) deduction is a common source of discrepancies! That's Section 199A, and it's fairly complex. The calculation can vary based on your total income, business type, and several other factors. To determine which is correct, check if your taxable income exceeds the threshold ($170,050 for single filers or $340,100 for joint filers in 2022). If you're over that, the calculation gets more complicated with phase-outs and limitations. If you're under, you should generally get a straightforward 20% deduction on your qualified business income. Also verify that both programs are classifying your business correctly - certain service businesses have different QBI rules than others.

This is the correct approach. I did this when I had a $1,500 discrepancy between TaxAct and H&R Block. Turned out H&R Block was incorrectly calculating my foreign tax credit. I printed both complete returns with all schedules and went through them with a highlighter. Found the difference on Form 1116.

That's a great suggestion! I just downloaded the PDF versions of the draft returns from both software and started comparing them. There's a huge difference on Schedule 1 - TurboTax is giving me a much larger deduction for my health insurance premiums as a self-employed person. I think FreeTaxUSA might be missing that entirely or calculating it wrong. Now I need to figure out which one is actually correct according to IRS rules!