Does anyone know if this will affect the way the conversion is taxed? My understanding is that with in-plan Roth conversions, you're supposed to pay tax on the pre-tax portion that gets converted, but not on any after-tax contributions. Would the wrong code change how the IRS calculates the taxable amount?

I've dealt with this exact issue before with my solo 401(k). You're absolutely correct that code G should be used for in-plan Roth conversions, not code 2. Code 2 is specifically for early distributions from IRAs with exceptions. Here's what I learned from my experience: First, definitely contact your plan administrator ASAP to request a corrected 1099-R. Many can turn these around quickly since it's just a code correction. Second, if they can't get you a corrected form before your filing deadline, you can still file your return and include a brief statement explaining that the transaction was an in-plan Roth conversion within your 401(k), not an IRA distribution. The key thing is to make sure the dollar amounts in the other boxes are correct - Box 1 (gross distribution), Box 2a (taxable amount), and Box 5 (employee contributions). The wrong code is annoying but won't change your actual tax liability as long as those amounts are right. Keep documentation of your request to the plan administrator. I had to push mine pretty hard - they initially said "code 2 is fine" but eventually admitted they were using outdated guidance and issued the correction.

This thread has been incredibly helpful - thank you all for sharing your experiences and advice! As someone new to dealing with IRS entity classification issues, I'm amazed at how common these S-Corp election problems seem to be. I'm particularly grateful for the detailed explanations about protective filing with Form 1120 and the importance of creating a clear paper trail. The Revenue Procedure 2013-30 reference and first-time penalty abatement options are things I never would have known to look into on my own. One question that occurred to me while reading through all this - for those who successfully resolved similar situations, how long did the entire process typically take from start to finish? I know everyone's case is different, but it would be helpful to have some realistic expectations about timeframes, especially for planning purposes with other business compliance matters. Also, has anyone dealt with this type of issue where there were multiple years involved? I'm wondering if having filed 1120-S returns for both 2019 and 2020 before the problem was discovered makes the case stronger or more complicated for backdating approval. This community is such a valuable resource for navigating these complex tax situations. The practical, real-world advice here is worth its weight in gold compared to trying to decipher IRS publications on your own!

What a nightmare situation, but I'm impressed by how methodically you're handling it! I went through something very similar with my consulting LLC a few years ago where the IRS had no record of our S-Corp election despite us filing 1120-S returns that were accepted. One thing I'd strongly recommend is requesting a complete Entity & Account Information Letter (Form 8940) from the IRS Business & Specialty Tax Line. This will show you exactly what entity type they have on file and what elections (if any) they've processed. It's much more comprehensive than just calling and asking - you'll get an official document showing their records. Also, when you do your protective 1120 filing, consider including Form 8832 (Entity Classification Election) as well, electing to be treated as a corporation. This creates a clear record that you're acknowledging the corporate status while your S-Corp election is pending. Some practitioners recommend this approach to show you're being completely transparent about the classification uncertainty. The good news is that with losses in both years and consistent S-Corp filings, you have a very strong case for reasonable cause relief. The IRS really doesn't want to create a mess by denying backdating when there's no tax avoidance motive and clear good faith compliance. Document everything, stay patient, and remember that these administrative tangles do get resolved - it just takes persistence!

I found myself in this exact situation last year with my partnership. We dissolved in May 2023, and I was confused about whether to use 2022 or 2023 forms. I ended up filing the extension with Form 7004 and waiting for the 2023 forms to be released. It was annoying to have that hanging over my head for months, but in the end, it was the cleanest approach. The final return was accepted without issues once I filed it in January using the correct year forms. One tip I'd add - make sure you file final Schedule K-1s for each partner and clearly mark them as FINAL. Also remember to file any required state dissolution paperwork, which is separate from your tax obligations.

I went through this exact scenario with my LLC partnership that dissolved in August 2024. After calling the IRS and speaking with a tax professional, here's what I learned: You absolutely need to use the 2024 forms for your 2024 dissolution - using 2023 forms could create processing issues and potential penalties. The IRS considers this a 2024 tax year event regardless of when it occurred during the year. Here's my recommended timeline: 1. File Form 7004 by March 15, 2025 (the original due date) to get an automatic extension until September 15, 2025 2. Wait for the 2024 Form 1065 to be released (usually late December 2024 or January 2025) 3. File your final return using the 2024 forms During the waiting period, keep all your records organized and consider preparing a draft return using the 2023 forms just to identify any issues early. When the 2024 forms come out, you can quickly transfer everything over. Also don't forget - you'll need to distribute final Schedule K-1s to all partners and handle any state-level dissolution requirements separately. The wait is frustrating but it's worth doing it right the first time!

As someone completely new to this community and tax lien investing, I have to say this entire discussion has been absolutely eye-opening! I came here with a question very similar to Chloe's original post, thinking this might be a straightforward investment opportunity, but wow - I had no idea how much I didn't know. What really stands out to me is how this conversation revealed so many layers of complexity I never would have considered. The state-specific legal requirements, federal tax implications that could create massive unexpected bills, and especially the human element that Lucas highlighted - realizing that these aren't just investment opportunities but real people's homes, often involving families going through medical emergencies, job loss, or elderly residents who might not even be aware their taxes are delinquent. The real-world experiences shared here have been incredibly valuable. Learning that Yuki only acquired 3 properties out of 45 liens over 8 years really puts the reality in perspective - this clearly isn't the quick path to property ownership that some investment guides might suggest. And those cautionary stories about procedural mistakes costing people their investments, combined with Oliver's warnings about owing taxes on imputed income from foreclosure acquisitions, make it clear this requires serious professional expertise. I think the consensus here is spot-on: if you want to help your community, focus on connecting property owners with available assistance programs rather than viewing their distress as an investment opportunity. And if you're looking to invest, there are definitely much simpler options that don't involve these ethical complexities and legal pitfalls. Thanks to everyone who took the time to share such detailed, thoughtful insights - this thread has been an invaluable education for newcomers like me and probably saved many of us from making costly mistakes!

As someone completely new to this community and the concept of tax lien investing, I have to say this entire discussion has been absolutely incredible! I came here with a question very similar to Chloe's original post, thinking this might be a straightforward way to earn some extra income, but reading through everyone's experiences has completely changed my perspective. What really struck me was how the conversation evolved from discussing basic financial mechanics to revealing all these layers of complexity - legal procedures that vary by state and county, federal tax implications that could create massive unexpected bills, and most importantly, the human element that Lucas brought up. Learning that these situations often involve elderly residents, families facing medical crises, or people who simply aren't aware of available assistance programs really puts everything in a different light. The practical experiences shared here were particularly eye-opening. Yuki's reality that only 3 out of 45 liens over 8 years resulted in property acquisition really dispels any notion that this is a quick path to real estate ownership. And those stories about procedural mistakes costing people their investments, combined with Oliver's warnings about owing taxes on imputed income from foreclosure acquisitions - honestly, it sounds like you could easily face unexpected tax bills that dwarf your initial investment. I think the consensus that's emerged makes perfect sense: if you want to help your community, start by learning about and sharing information on assistance programs for property owners in distress rather than viewing their situations as investment opportunities. And if you're looking to invest, there are certainly much simpler options that don't carry these ethical complexities and legal pitfalls. Thanks to everyone who shared such detailed, honest insights - this thread has been an invaluable education and probably saved many of us newcomers from making very costly mistakes!

Did anyone else notice that the IRS has gotten WAY better at sending notices for unfiled returns? My brother ignored filing for 2 years (2022-2023) thinking his income was too low to matter, and he just got a letter last month asking about those missing returns. Not trying to scare you OP, but just giving you a heads up that they are more on top of this stuff now with their upgraded computer systems. Better to file voluntarily before they contact you!

Hey Haley! I totally get the anxiety you're feeling - I was in almost the exact same situation a few years ago when I was around your age. The good news is that you're definitely not going to get arrested over this, especially with the income levels you're describing. The other commenters are right that you likely weren't even required to file for those years if you made under the standard deduction threshold. But here's the thing - even if you weren't required to file, you might actually be owed money back! If your employers were withholding federal taxes from your paychecks (which they often do automatically), you could have refunds waiting for you. I'd recommend gathering any W-2s you still have from those years, or requesting wage transcripts from the IRS if you don't have them. The IRS is actually pretty understanding about situations like this, especially for young adults who genuinely didn't know the requirements. The fact that you're taking action now to figure this out shows you're being responsible. Don't let the anxiety eat at you - this is much more common and fixable than you might think. You've got this!