Thanks for bringing this up - I hadn't considered the statute of limitations angle. Do you think filing the Form 8606 now for those old contributions might trigger some kind of review of those past tax years?

Filing Form 8606 now for old contributions typically doesn't automatically trigger an audit, but it does put those years on the IRS's radar. The good news is that you're trying to comply with the rules by properly documenting your basis in the IRA, which looks better than if they discovered the unreported contributions some other way. The key is documentation - make sure you have records of all those contributions and be prepared to show they were made with after-tax dollars. If you're concerned, working with a tax professional who specializes in IRA issues might be worth the investment to ensure everything is handled properly and to help respond if the IRS does have questions.

This is incorrect information. The Tax Cuts and Jobs Act eliminated the deduction for IRA losses completely through 2025. Even before that, claiming such losses was extremely difficult and rarely beneficial due to the AGI limitations. Please don't give tax advice if you're not certain - it could cause serious problems for the OP.

That's interesting. I didn't have any extreme circumstances like that though. Just poor planning and procrastination on my part unfortunately. Do you know if the IRS ever just "forgives" these situations if I explain it was an honest mistake?

The IRS generally doesn't "forgive" missed deadlines just because it was an honest mistake. They hear that all the time. If it was truly just procrastination, you'll need to follow the pay-first-then-claim-refund route the others mentioned. However, there was actually a recent Supreme Court case (Boechler v. Commissioner) that established equitable tolling could apply for certain tax deadlines, though that was for Collection Due Process cases, not deficiency notices. Still, tax law continues to evolve on these issues.

In my experience, amended returns are taking FOREVER right now - like 6+ months. I filed one in April and it's still "processing" according to Where's My Amended Return tool. But that's separate from the Tax Court deadline issue. The amended return won't stop the deficiency assessment if you missed the petition deadline.

Thanks for the reminder about the Section 199A deduction! Is that handled automatically through Form 8995A or do I need to do something else to claim it? For the HSA, I'm contributing the maximum for individual coverage. One question though - if I switch to family coverage mid-year, can I contribute the full family amount or is it prorated?

Form 8995A is specifically for calculating your Section 199A (Qualified Business Income) deduction, so no need to do anything additional. It flows automatically to your 1040. For HSA contributions after switching to family coverage mid-year, it gets a bit complicated. You can actually contribute the full family maximum ($8,300 for 2024) if you're still covered by a family HDHP on December 1st and remain covered for the full calendar year of 2025 (called the "last-month rule"). If you don't maintain coverage through December 2025, you'd need to prorate your contribution based on how many months you had each type of coverage.

Just a quick correction - the SE tax is actually 15.3% (12.4% Social Security + 2.9% Medicare) on that 92.35% of net earnings, up to the Social Security wage base limit ($168,600 for 2024). Then 2.9% Medicare tax continues beyond that with no limit, plus an additional 0.9% for high earners. But your point about deducting half on Schedule 1 is super important - loads of people miss that and it's a significant deduction!

Thanks for bringing up the look-back rule - I hadn't considered that! I do have a small 1231 loss from a property I sold in 2023. So if I understand correctly, a portion of my current gain would be considered ordinary income rather than capital gain? Would that portion not be eligible for OZ investment?

Yes, exactly. If you had a 1231 loss in 2023, a portion of your current 1231 gain would be recaptured as ordinary income to the extent of that previous loss. That recaptured portion would not be eligible for OZ investment, since OZ investments can only be made with capital gains. For example, if you had a $10,000 1231 loss in 2023 and now have a $50,000 1231 gain, $10,000 of your current gain would be treated as ordinary income and only the remaining $40,000 would be treated as capital gain eligible for OZ investment.

I invested in an OZ fund after selling a small apartment building in 2022. The fees are definitely higher than typical investment funds, but remember you're getting tax benefits that can offset those costs. I went with a fund focused on multifamily development in emerging markets which aligned with my investment goals. Make sure you do due diligence on the fund manager's track record and understand the timeline - you need to hold for 10+ years to get the full tax benefits on appreciation. And be prepared for the tax bill in 2026 on your initial deferred gain.

Interesting approach! Approximately what percentage of your annual earnings were you able to shift this way? And did you face any challenges with the IRS regarding the size of the contributions relative to employee compensation?

We were able to shift around 15-20% of our annual earnings through the defined benefit plan. The exact amount depends on factors like age, compensation levels, and retirement age assumptions, but it made a meaningful difference in our accumulated earnings position. We haven't faced IRS challenges because we worked with an actuary to ensure our contributions were justifiable based on legitimate factors like age and compensation. The key is ensuring the plan is properly designed as a genuine retirement vehicle, not just a tax avoidance mechanism. Having multiple real employees (not just family members) participating in the plan also helps demonstrate its legitimacy.

I strongly advise against offshore structures for avoiding PHC or AET taxes. The IRS has extremely robust anti-avoidance rules for foreign corporations owned by US persons. You'll trigger Controlled Foreign Corporation (CFC) rules, GILTI (Global Intangible Low-Taxed Income) taxes, PFIC (Passive Foreign Investment Company) regulations, and face extensive foreign reporting requirements with massive penalties for non-compliance. The compliance costs alone would likely exceed any theoretical tax benefits, and aggressive offshore structures specifically designed for tax avoidance could trigger significant penalties or even criminal charges.