I just went through this process with a delayed refund. Here's what I learned: • Interest starts accruing after 45 days from filing deadline or when you filed (whichever is later) • For Q1 2024, interest rate is 7% (changes quarterly) • Interest is calculated daily, compounded quarterly • Interest IS taxable income in the year you receive it • The IRS will send Form 1099-INT if interest is $10+ • If you owe the IRS, underpayment interest rate is also 7% currently • Failure-to-pay penalty is 0.5% per month (separate from interest

Great breakdown everyone! I'm dealing with a similar situation where I filed early but there was an error on my return that delayed processing. One thing I learned from calling the IRS is that if THEY make an error during processing (not your fault), the 45-day clock starts from when they should have issued your refund, not when they actually fix their mistake. So if anyone is in a similar boat, it might be worth calling to clarify the timeline. The interest calculation can get pretty complex when there are processing delays on their end vs. issues with your original filing.

I'm dealing with a similar situation right now with our LLC dissolution. One thing that's been crucial is making sure you have proper documentation for the loans versus capital contributions distinction. The IRS scrutinizes this heavily during partnership audits. For Mike's situation, if the loans were truly loans (not disguised capital contributions), he should be able to claim a business bad debt deduction when it becomes clear the partnership can't repay. The key is proving there was a genuine debtor-creditor relationship with expectation of repayment. A few practical tips from my experience: 1) Get written confirmation from your accountant that the business is insolvent and unable to pay its debts, 2) Document any collection efforts made (even if unsuccessful), and 3) Make sure the loans were consistently treated as debt on your books throughout the partnership's existence. The timing of the bad debt deduction is also important - it should be claimed in the tax year when the debt becomes worthless, which might be before you file the final 1065 if insolvency is already established.

I'm currently going through a similar partnership dissolution and wanted to share some insights about the partnership's side of this equation. While everyone's focused on Mike's bad debt deduction (which is correct), don't forget that the partnership itself may need to report cancellation of debt income if the loans are forgiven. However, since you mentioned the partnership is insolvent, you'll likely qualify for the insolvency exclusion under IRC Section 108. This means the partnership won't owe tax on the forgiven debt as long as you can demonstrate that total liabilities exceeded total assets immediately before the debt cancellation. You'll need to file Form 982 with your final 1065 to claim this exclusion. Make sure to prepare a balance sheet showing the partnership's insolvency - this documentation will be crucial if the IRS questions the exclusion. The timing matters too: the insolvency test is applied immediately before each debt cancellation, so if you're forgiving multiple partner loans, document the financial position before each forgiveness. This is often overlooked in partnership dissolutions, but getting it wrong can result in unexpected tax liability for the partnership even when it has no assets to pay with.

I'm so sorry you're dealing with this frustrating situation! As someone who's been through a similar overpayment mess with my employer, I completely understand how overwhelming it feels to suddenly owe thousands of dollars you never actually received. The good news is that while you do have to repay the full gross amount to the university (including the tax portion), you're not permanently out that money. When you file your 2024 taxes, you'll be able to recover the withheld taxes through the "claim of right" provisions. Here's what I'd prioritize based on my experience: **Get documentation BEFORE paying anything** - Request a detailed breakdown showing the overpayment amount, all tax withholdings (federal, state, FICA), and written confirmation this will be treated as a "wage overpayment correction." This language is crucial for your tax filing. **Don't accept their initial timeline as final** - This was their payroll error that went undetected for nearly a year. Most universities have more flexible policies than their initial demand letter suggests. Ask about formal appeal processes or extended payment plans. **Consider timing strategically** - Since you're crossing tax years (overpayment in 2023, repayment in 2024), you might benefit from consulting a tax professional about whether to amend your 2023 return or claim a credit on your 2024 return. Remember, you have more negotiating power than you might think. Taking a few weeks to understand your options and get proper documentation is completely reasonable given that this situation exists because of their mistake, not yours. This is definitely solvable - hang in there!

I'm really sorry you're going through this - wage overpayment situations are incredibly frustrating and confusing! I actually dealt with something very similar when my employer overpaid me across tax years. The unfortunate reality is that yes, you do owe the university the full gross amount including the tax withholdings, even though you never received that portion. However, you're not permanently out that money - you'll be able to recover the withheld taxes when you file your 2024 return using the "claim of right" provisions. Here are the key things I learned from my experience: **Documentation is absolutely critical** - Before you pay anything, get written confirmation from the university that includes: the exact overpayment amount, breakdown of all withholdings (federal, state, FICA), confirmation this was on your 2023 W-2, and most importantly, language stating this is a "wage overpayment correction." **You have more negotiating power than you think** - Don't feel pressured to pay immediately. This was their error that went unnoticed for almost a year. Many universities have appeal processes or can offer payment plans. I successfully negotiated a 90-day timeline by explaining the financial hardship their mistake created. **Timing matters for taxes** - Since you're crossing tax years, consider whether delaying repayment until January 2025 might simplify things by keeping everything in the same tax year. A brief consultation with a tax pro could help you determine the most beneficial approach. Remember, taking time to handle this properly is completely reasonable given it's their mistake. Don't let them rush you into terms that aren't optimal for your situation!

Let me clarify a few things about audits and refunds that might help you understand what's happening: 1. First, the IRS cannot take your 2024 refund until the audit is complete and they've determined you actually owe money. 2. Once the audit is complete, they'll send you a Notice of Deficiency (CP3219A or 90-day letter). 3. You'll have 90 days to either pay the amount, appeal through Tax Court, or request an audit reconsideration. 4. Only after this process is complete and if you have a confirmed debt will they potentially offset your refund. 5. Even then, you can request a payment plan that might prevent them from taking your entire refund. This step-by-step process takes time, so your 2024 refund is likely safe for now unless you already have confirmed debts from previous years.

I'm going through something similar right now and this thread has been incredibly helpful! Just wanted to add that if you're a gig worker like Uber/DoorDash, make sure you have ALL your documentation organized before they ask for it. I learned the hard way that they want detailed mileage logs, not just estimates. Also, don't panic about the audit itself - mine has been going on for 3 months and my 2024 refund came through just fine last month. The IRS agent I spoke with explained that audits and current year refunds are handled by completely different departments, so one doesn't automatically affect the other. One tip that helped me: I created a simple spreadsheet with dates, starting/ending locations, miles driven, and purpose for each trip. It made responding to their requests much easier than digging through months of scattered receipts.

Does anyone know if you can still do a backdoor Roth for 2024? I thought I heard something about the government closing this "loophole" but I'm not sure if that actually happened or was just proposed.

This is exactly what happened to me last year! The 1099-R showing the full amount as taxable is completely normal and expected for backdoor Roth conversions. Don't panic - you're not doing anything wrong. The key thing to remember is that the 1099-R is just the brokerage firm's way of reporting the distribution to the IRS. They have no way of knowing whether your original contribution was deductible or non-deductible, so they default to showing the entire amount as potentially taxable. When you file Form 8606, you're essentially telling the IRS "Hey, I already paid taxes on this money when I earned it, so the conversion shouldn't be taxed again." The form calculates your basis (the after-tax money you put in) and shows that the taxable portion of the conversion is $0. Make sure you keep good records of your Form 8606 - I learned the hard way that the IRS doesn't always automatically match everything up in their system. But as long as you file it correctly with your return, you'll be fine!