Thanks for this suggestion! I've heard about backdoor Roth conversions but wasn't sure if they applied to my situation. If I'm understanding correctly, since I can't deduct the traditional IRA contribution due to my income, converting it to a Roth would mean I'm not being taxed twice? Do you know if doing this backdoor conversion would fix the TurboTax error I'm getting, or would it potentially create new complications for filing?

You've got it exactly right - since you can't deduct the traditional IRA contribution, you've already paid tax on that money. If you convert to a Roth soon after contributing (before there's significant earnings), you'll pay very little or no additional tax on the conversion. Then all future growth will be tax-free when you withdraw in retirement. Regarding your TurboTax issue, doing a backdoor Roth actually might simplify things. First, fix your current issue by properly coding the inherited IRA distribution and marking your traditional IRA contribution as non-deductible. Once that's working, you can add the Roth conversion as a separate transaction. TurboTax has a specific section for Roth conversions that's generally quite straightforward. The software will generate Form 8606 to track your non-deductible basis and properly report the conversion.

I switched from TurboTax to FreeTaxUSA last year and found it much easier for handling my inherited IRA from my dad. Their interface for entering distribution codes is more straightforward, and they have really clear explanations about inherited IRA rules. Plus it's way cheaper!

Did you need all those licenses even if you were just doing loans to friends and family? Or were you advertising to the general public?

I'm going through this right now! The surety bond was like $1,500 for me - totally didn't budget for that expense when switching my business. And the application process took almost 3 months.

That approach might work for some businesses, but private lending is much more heavily regulated than either graphic design or dropshipping. Banking/lending activities often require specific licenses and registrations regardless of your LLC structure. While the LLC itself might be flexible in its business purpose, certain industries have regulatory requirements that exist separately from business entity rules. Not complying with lending regulations can result in significant penalties, as another commenter mentioned about their $5,000 fine. It's always better to do things properly from the start rather than risk regulatory issues down the road, especially in financial services.

That makes a lot of sense now. I was definitely mixing up the federal and state parts. Looking at my W-2s now, I can see the state withholding amounts in box 17. One more question - do I need to enter anything for local tax withholding if my state doesn't have local income taxes?

If your state doesn't have local income taxes, then you would just enter zero for the local tax withholding amount. Some states have both state and local income taxes (like New York with NYC tax, or Ohio with municipal taxes), while others only have state-level income tax. Just be sure to enter the state withholding amount from box 17, and if there's nothing in box 19 for local taxes, enter zero there.

This cleared it up better than anything else I've read! So simple when explained that way. Software tax questions are so confusing sometimes.

Thanks for that tip! Do you know if the other payment processors (PayUSAtax or ACI Payments) have different fees? Are any of them cheaper than Pay1040?

Yes, each processor has slightly different fees. Last I checked, PayUSAtax charges 1.96% for credit cards (minimum $2.69) and $2.55 for direct debit, while ACI Payments/Official Payments charges 1.99% (minimum $2.50) for credit cards and $2.00 for direct debit. So if you're using direct debit, ACI Payments is actually the cheapest at $2.00 flat fee. If you're using a credit card, Pay1040 is still the best deal at 1.87%. The differences aren't huge, but they can add up if you're making multiple payments.

Do you know if the failure-to-pay penalty applies even if you've filed on time? I thought that was only if you filed late?

Is there any way to know if you're getting someone with real expertise vs a seasonal worker? I always see those pop-up tax places and wonder about the qualification level.

Ask about their credentials and experience directly. Anyone can call themselves a "tax preparer," but CPAs, Enrolled Agents, and tax attorneys have specific certifications and continuing education requirements. Look for those designations. At seasonal shops, ask how many years they've been preparing taxes and what training they've received. Experienced preparers, even without formal credentials, often have valuable practical knowledge. If they start working there just a few weeks before tax season, that's a red flag. Also, ask if they work on taxes year-round or just during tax season - year-round indicates more commitment to the profession.

Did you itemize deductions or take the standard? I feel like that's where most people might miss stuff when using software vs a pro.