HELP! I picked up my tax return and I think it\'s wrong!

[socaintexas]

We have been using someone to do our taxes for the past 17 years.  I guess I just assumed he was a CPA.  He is in a small town and was recommended to me by several people because he handles a lot of farm/ranch accounts.  Admittedly, I have historically not tried to educate myself about his type of stuff and he has always gotten us a small refund, so I just sign it and send it in.

 

I picked my taxes up yesterday and perused them.  I did not get a chance to look at them until today.  He is saying that was owe $1820, which is fine, I figured we would.  I had explained to him that we did two backdoor Roths this year, mine and a spousal one, and I sent him two form 8606's to fill out and explained that next year we will have to show the Roth conversion.  I also decided to open a SEP-IRA and contribute $7829 (employer contribution) to get to the $53K limit.  I explained to him that I was doing this and it would be done prior to 4/18.   He filled out the 8606 forms (nondeductible IRA) in the amount of $7830.  Shouldn't that be deductible?  No where are the two $5500 tIRA contributions listed.  He did fill out the 8889 form for my HSA, which he has not done in previous years.

 

What do I do?  I'm no accountant but from the limited amount of knowledge I have gleaned recently this definitely does not sound like it was done correctly.  I plugged my numbers into TurboTax (using the numbers he plugged in for the farming/ranch part, which admittedly I'm not sure where some came from) and it is showing that I owe $2165. Do I file an extension and mail a check in?  If so for how much?  Do I file and extension and not mail a check in?  Do I send in Turbotax or take it to a CPA?   I guess it's true that ignorance is bliss and a little bit of knowledge is indeed a dangerous thing!

[Hatton]

I am no tax expert but I don't think you can do back door roths with a sep Ira.  I have a sep Ira that is too large for me to reasonably convert it all so I can't do back door roths.

[PhysicianOnFIRE]

You need an individual 401(k) rather than a SEP-IRA. Otherwise, you'll be paying taxes on your Roth conversions, i.e. the backdoor is closed.

See the pro-rata rule.

 

[jfoxcpacfp]

socaintexas wrote:

I also decided to open a SEP-IRA and contribute $7829 (employer contribution) to get to the $53K limit.  I explained to him that I was doing this and it would be done prior to 4/18.   He filled out the 8606 forms (nondeductible IRA) in the amount of $7830.  Shouldn’t that be deductible?  No where are the two $5500 tIRA contributions listed.  He did fill out the 8889 form for my HSA, which he has not done in previous years.

Click to expand...

The SEP contribution is deductible. Just be sure to set up a SOLO-k and r/o the SEP before 12/31/17 and you won't owe any taxes under the pro-rata rule. Since you are beyond the deadline to set up a SOLO-k for 2016, using a SEP is the best choice, even given the fact that you have contributed to backdoor Roth IRAs.

If you cannot set up a SOLO-k for 2017 and r/o the SEP into it before 12/31/17, then recharacterize the Roth conversions back to the nondeductible TIRAs until you can do so. Don't miss out on contributing to your TIRAs, though. See my post from yesterday. You might also want to read Explaining Backdoor Roth IRAs.

You are correct that your 8606's should have $5,500 on each. It's funny that you had to provide the forms to your tax preparer - was this something new for him?

socaintexas wrote:

He did fill out the 8889 form for my HSA, which he has not done in previous years.

Click to expand...

Are you saying that you missed deducting prior contributions? You can go back 3 years to amend but your time is running out for the earliest year.

socaintexas wrote:

Do I file an extension and mail a check in?  If so for how much?  Do I file and extension and not mail a check in?  Do I send in Turbotax or take it to a CPA?

Click to expand...

Too much I don't know. You can send in Turbotax and have a CPA review and amend later. Or you can file for an extension and get a second opinion from a CPA with more experience than your tax preparer seems to have.

[jfoxcpacfp]

hatton1 wrote:

I am no tax expert but I don’t think you can do back door roths with a sep Ira.  I have a sep Ira that is too large for me to reasonably convert it all so I can’t do back door roths.

Click to expand...

Have you thought about rolling it in to your current employer's 401k/403b? I believe you've mentioned in previous posts that you are toying with retirement. If so, you won't have it tied up for very long before you can roll it over to your control.

[Hatton]

I am my own employer so no employer 401-k here. I am not particularly worried about the inability to do a backdoor Roth.  I am worried about taxes at 70 with SS and RMDs.  First world problem for super savers.  I did one Roth conversion last year.

[socaintexas]

jfoxcpacfp wrote:

socaintexas wrote:

I also decided to open a SEP-IRA and contribute $7829 (employer contribution) to get to the $53K limit.  I explained to him that I was doing this and it would be done prior to 4/18.   He filled out the 8606 forms (nondeductible IRA) in the amount of $7830.  Shouldn’t that be deductible?  No where are the two $5500 tIRA contributions listed.  He did fill out the 8889 form for my HSA, which he has not done in previous years. 

Click to expand…

The SEP contribution is deductible. Just be sure to set up a SOLO-k and r/o the SEP before 12/31/17 and you won’t owe any taxes under the pro-rata rule. Since you are beyond the deadline to set up a SOLO-k for 2016, using a SEP is the best choice, even given the fact that you have contributed to backdoor Roth IRAs. Yes, this is the plan.  

If you cannot set up a SOLO-k for 2017 and r/o the SEP into it before 12/31/17, then recharacterize the Roth conversions back to the nondeductible TIRAs until you can do so. Don’t miss out on contributing to your TIRAs, though. See my post from yesterday. You might also want to read Explaining Backdoor Roth IRAs.

You are correct that your 8606’s should have $5,500 on each. It’s funny that you had to provide the forms to your tax preparer – was this something new for him?  I think it may have been!  

socaintexas wrote:

He did fill out the 8889 form for my HSA, which he has not done in previous years. 

Click to expand…

Are you saying that you missed deducting prior contributions? You can go back 3 years to amend but your time is running out for the earliest year.  No, I think I got the deduction because it comes out of my w2 wages but the paperwork was not done  

socaintexas wrote:

Do I file an extension and mail a check in?  If so for how much?  Do I file and extension and not mail a check in?  Do I send in Turbotax or take it to a CPA? 

Click to expand…

Too much I don’t know. You can send in Turbotax and have a CPA review and amend later. Or you can file for an extension and get a second opinion from a CPA with more experience than your tax preparer seems to have.

Click to expand...