What kind of deductions did you miss? I'm self-employed too and worried I might be overpaying.

The biggest ones I missed were home office deductions (I was afraid of an audit so I skipped it entirely), health insurance premiums (which are deductible for self-employed people), and retirement plan contributions. I also hadn't properly calculated my business mileage. The CPA also helped me properly categorize some expenses I had lumped together as "miscellaneous" which gave me more legitimate deductions. Even things like a portion of cell phone bills and internet costs can be deductible if you use them for business.

Yes, but there are very specific rules. Tax debts can potentially be discharged in Chapter 7 bankruptcy if they meet ALL these conditions: - The taxes are income taxes (not payroll or fraud penalties) - The debt is at least 3 years old (from the due date) - You filed your tax return at least 2 years before filing bankruptcy - The IRS assessed the tax at least 240 days before filing bankruptcy - You didn't commit fraud or willful evasion For 2022 taxes, you wouldn't meet the 3-year rule yet, so bankruptcy wouldn't help with this specific debt until at least 2026. Also, bankruptcy has serious long-term consequences for your credit and financial future.

Would this documentation help reduce any tax liability though? Or is it just to explain the unusual situation if questioned?

It's primarily to explain the unusual situation if questioned during an audit. The documentation itself won't reduce your tax liability, as the property will still be treated as a non-primary residence for capital gains purposes. However, having this documentation ready could prevent potential complications if the IRS questions why you owned a property that wasn't your primary residence but also wasn't generating rental income. Without proper explanation, they might incorrectly assume it was an unreported rental property, which could trigger a more extensive audit.

Good point! In California we have totally different rules for property tax reassessments when property transfers between family members. The fed and state systems barely talk to each other.

14 Oh I didn't realize state withholding was separate! Does changing your federal W-4 automatically adjust your state withholding too, or do you have to do both separately?

19 It depends on your state. In some states, your state withholding is based on your federal W-4, so changing one affects the other. But many states have their own withholding forms. For example, states like California (DE 4), New York (IT-2104), and Illinois (IL-W-4) have their own forms. Your employer's HR department should know which forms apply to your state. If you only adjust your federal withholding, you might still get a large state refund, so it's worth looking into both!

5 This is really good advice. I always aim to get a small refund (around $500) rather than break even exactly. Life changes happen - you might get a raise, have a side gig, or have investment income you didn't expect. That small cushion helps prevent a surprise tax bill.

I'm pretty sure my recharacterization was completed before the deadline (did it in mid-April 2024 for the 2023 contribution), but I had already filed my 2023 taxes in February. Does that mean I still need to amend to include the Form 8606, or can I just file the form separately?

You'll need to file an amended return (Form 1040-X) along with the Form 8606 for 2023. Since you already filed your original return without the 8606, you need to formally correct that with an amendment. If you hadn't filed yet when you did the recharacterization, you could have just included the 8606 with your original filing. But since you already filed without it, an amendment is necessary to establish your basis properly.

I used TurboTax last year for my backdoor Roth and had mixed results. It does have a section for Form 8606, but it doesn't specifically prompt you about recharacterizations. I had to know exactly what I was doing and override some of its suggestions.

Thanks for bringing this up! I'm in Arizona - do you know if there are any specific state rules I should look into? I've maintained all my utilities and have been paying someone to check on the house monthly and do basic maintenance.

Arizona is actually pretty reasonable with their rules from what I know. The key is that you've maintained the utilities and have someone checking on the place - that shows intention to return and ongoing maintenance of the property as a residence. Check with the Arizona Department of Revenue to be sure, but they generally follow federal guidelines for primary residence. The fact that you've been paying for maintenance is a strong indicator that you haven't abandoned the property. Just make sure you have documentation of those payments for the maintenance person as additional proof if needed.

I went through an audit in 2022 for my 2020 taxes that included questions about my primary residence status. They asked for: - Voter registration - Driver's license - Where my vehicles were registered - Bank statements showing my address - Tax returns from previous years - Utility bills - Homeowners insurance They never asked for proof I physically occupied the house for X days. It was all about where my legal ties were established.