That's a smart idea I hadn't considered. I do have a good relationship with my business banker. Did your banker connect you directly or just give you a name to contact? I'm wondering if a warm introduction might help get past the "not taking new clients" barrier.

My banker actually made a direct introduction via email, which definitely helped get me in the door. He specifically mentioned my business challenges and growth plans, which I think made the CPA more interested in working with me. A warm introduction from a mutual contact can absolutely help bypass the "no new clients" response that's so common with established CPAs. CPAs often prioritize clients who come through referrals from trusted sources because it indicates you're likely to be a serious business owner who values professional advice. It's worth asking your banker for that direct introduction rather than just getting a name - makes a world of difference!

I would be super careful with online reviews for CPAs. My friend owns a tax practice and said there are firms that offer discounts in exchange for positive reviews. Plus, a lot of the negative reviews are from people who are mad because the CPA wouldn't do something illegal or aggressive with their taxes!

Thanks so much for these specific steps! I'll try going through them tonight. Do you remember if there was any specific screen where you had to indicate that the funds were "already taxed" or something similar? I feel like I might be missing a checkbox somewhere.

Yes, there is a specific screen! After entering the 1099-R with code 2, TurboTax asks something like "Tell us about this distribution." That's where you need to select that it was a conversion of non-deductible contributions. Then on the next screen, it will ask if you've already paid taxes on this money - that's the crucial checkbox you need to mark YES on. The software doesn't make this obvious at all. Once you check that box, you should see your taxable amount reduce to zero (or to just the earnings portion if there were any gains between recharacterization and conversion).

My broker (Vanguard) charged $25 for the recharacterization paperwork last year, so $50 seems on the high end but not outrageous. Fidelity doesn't charge anything for this service though, at least they didn't when I did it.

My broker charged $35 for the recharacterization paperwork, which seemed reasonable given the headache it saved me. The backdoor Roth conversion went perfectly smooth right after the recharacterization - it was all done within the same week. The paperwork hassle was worth it since I was able to keep the full contribution amount in retirement accounts rather than taking a distribution and paying the 6% penalty.

Thanks for this suggestion. If I recharacterize to Traditional, would I need to file any special forms with my taxes this year? And can I just open a Traditional IRA now even though the contribution was technically made in 2023?

Yes, you would need to file Form 8606 with your tax return to report the non-deductible Traditional IRA contribution. This is important because it establishes your "basis" in the Traditional IRA, which will matter for tax purposes if you ever convert that money to a Roth in the future. You can open a Traditional IRA now even though the contribution was for 2023. The recharacterization process will treat it as if you made the contribution to the Traditional IRA in the first place. Just make sure you complete the recharacterization before your tax filing deadline (including extensions).

That's exactly what happened. OP said FreeTaxUSA calculated they could contribute $4000 each rather than the full $6500. So they're in the phase-out range, not completely over it. They contributed $4500 each, which is $500 over what's allowed at their income level.

Do you know if the FBAR requirement applies to joint accounts? I have access to my parent's account in their home country that definitely exceeds $10k but it's not technically my money.

Yes, the FBAR requirement absolutely applies to joint accounts. If you have signature authority over a foreign account - even if the money isn't technically yours - you still need to report it if the total of all your foreign accounts exceeds $10,000 at any point in the year. This is a common oversight that can lead to serious penalties, so I'm glad you asked. The reporting is separate from your tax return and done electronically through FinCEN's BSA filing system. The good news is they have procedures for submitting late FBARs with explanations for reasonable cause to potentially reduce penalties.

FreeTaxUSA lets you file prior years for only $15 per federal return (state is extra). They have forms going back several years. You'll have to mail in the printed returns though - e-filing isn't available for prior years on most platforms.

Thanks for sharing your experience! Did you use a tax professional to help with your OIC or did you handle it yourself? I'm trying to gauge how complicated the process really is.

I started doing it myself but quickly realized I was in over my head. The forms themselves aren't terribly complex, but understanding what the IRS will allow for expenses and how to present your financial situation in the most accurate but favorable light is where professional help made a difference. I used an Enrolled Agent who specialized in tax resolution. Cost me about $2,500, but considering they helped me get an offer accepted that saved me over $40,000, it was money well spent. The EA knew exactly which expenses would be questioned and made sure I had documentation ready. They also helped me respond when the IRS came back with questions, which they inevitably did.

Is that 5-year monitoring period standard for everyone? That seems like a really long time to be under the microscope.