23 Has your wife used any of the HSA funds for medical expenses yet? That could complicate things if she's ultimately not eligible and needs to return the money. Also, what type of visa is she on? Some visa types have different tax treatments that might impact this situation.

H4 visa holders have a particularly tricky situation with HSAs. Since H4 spouses are generally considered non-resident aliens for tax purposes (unless they've elected to be treated as residents), they typically can't take HSA deductions even if they technically meet the other eligibility requirements. The good news is that since she hasn't used any funds yet and you're catching this early in 2025, you have time to correct it. With only employer contributions of $1,200, you'll want to contact her HR department immediately to: 1) Stop future contributions 2) Request a return of contributions before year-end to avoid the 6% excise tax The employer should be able to process this as a mistaken contribution since they likely weren't aware of her tax status when setting up benefits. Make sure any returned funds are coded properly so they don't create additional tax complications. Since H4 visa rules can be complex and there are some situations where spouses might elect resident treatment, I'd also recommend confirming her exact tax status for 2025 with a tax professional who handles international cases.

Has anyone calculated whether this actually saves money in the long run? I'm in a similar situation and trying to figure out if the tax benefits outweigh the hassle of the transfer.

This is a complex situation that really requires careful planning. I went through something similar with my S-Corp about 18 months ago and learned some hard lessons. One thing I don't see mentioned yet is the timing of when you do the valuation for the distribution. The IRS requires you to use fair market value on the date of distribution, but with volatile investments, this can make a huge difference. I made the mistake of not coordinating the valuation date with my transfer, and ended up with a mess when my ETFs dropped significantly between when we calculated the distribution value and when Fidelity actually processed the transfer. Also, make sure your S-Corp election is still valid before doing this. I discovered during my transfer that we had inadvertently violated some S-Corp requirements a year earlier (related to shareholder loans), which could have invalidated our election. Fortunately we were able to fix it retroactively, but it could have been a disaster. My advice: get everything documented in writing from your CPA first, including exactly how they plan to handle the mechanics of the transfer, the valuation method, and how it will be reported on both your business and personal returns. Don't rely on verbal assurances for something this significant.

I'm dealing with a similar FSA situation right now, so this thread has been incredibly helpful! One thing I wanted to add that I don't think anyone has mentioned yet - if you have pets, many veterinary expenses are NOT FSA eligible, but service animal training and care can be if you have a documented medical need. However, what IS often overlooked is that if you have any skin conditions, eczema, or dermatitis, certain moisturizers and skincare products can be FSA eligible with a doctor's note. I was able to use about $150 of my remaining FSA funds last year on CeraVe and other therapeutic skincare products after getting a simple letter from my dermatologist stating they were medically necessary for my condition. Also, don't forget about menstrual products - they became permanently FSA eligible a few years ago without needing any prescription. If you or anyone in your household menstruates, you can stock up on a year's worth of supplies. For your specific tax situation with the dental reimbursement, I'd recommend keeping a separate folder with all documentation related to this incident. The FSA administrator should provide you with a corrected tax form showing the adjustment, but having your own records will make things much smoother if there are any questions during tax season. You're definitely not alone in this - the intersection of insurance timing and FSA deadlines catches a lot of people off guard!

I went through almost this exact situation two years ago! The FSA "double-dipping" issue is surprisingly common, especially with dental work where insurance processing can take weeks or months after you've already paid with your FSA card. Here's what I learned from my experience: First, don't panic about the card being locked - it really is just administrative and won't affect your credit or ability to access future FSA funds. The manual reimbursement process ended up being much smoother than I expected, especially since most administrators now have decent mobile apps for submitting receipts. For your remaining $270, I'd suggest focusing on higher-value items you'll actually use: - A good electric toothbrush with replacement heads ($80-120) - Blue light glasses if you work at a computer ($50-100) - Compression socks for work - no prescription needed ($40-60) - Stock up on OTC medications you regularly use - Consider scheduling a physical therapy evaluation if you have any minor aches or pains One thing that really helped me was switching my regular prescriptions to 90-day fills instead of 30-day - that alone used up about $200 of my remaining balance. For the tax situation, it's really not as scary as it sounds. You'll just report the reimbursed amount as additional income - essentially paying the taxes you would have paid if you hadn't used pre-tax FSA funds originally. I set aside about 25% of the amount to be safe. Most importantly, call your HR department (not just the FSA administrator) to ask about a grace period. Many plans give you an extra 2.5 months after the plan year ends to use remaining funds, which would take all the time pressure off your situation. You're handling this the right way by being proactive about it!

Have u looked into whether your CPA might have made an actual error? If they recommended filing the 1041 without discussing how it would impact other aspects of your finances, that could potentially be considered negligence. Not saying you should sue or anything but maybe they'd be willing to cover the costs of fixing the situation (like filing amended returns) if you bring it up.

This is exactly why comprehensive tax planning needs to look beyond just the immediate tax year. Your situation highlights a common issue where CPAs focus on optimizing current-year taxes without considering the broader financial implications. Since you mentioned planning to retire in the next two years, you might want to explore a few angles: 1. **Mega backdoor Roth**: If your employer's 401k plan allows after-tax contributions and in-service withdrawals, you could potentially contribute significantly more to Roth accounts than the standard limits. 2. **Timing future estate distributions**: If there are ongoing estate matters, you might have some control over when future income is recognized, potentially keeping your AGI below Roth thresholds in future years. 3. **HSA maximization**: If you have access to an HSA, maxing that out can provide triple tax benefits and serve as supplemental retirement savings. The frustrating part is that this was totally preventable with better communication. Going forward, make sure any tax professional you work with understands your complete financial picture, including retirement goals. A good tax advisor should be asking about these things upfront, not just focusing on minimizing the current year's tax bill.

Question for anyone who has dealt with this - if I find I made a mistake on a previously filed return (for 2023) but haven't received any notices from the IRS yet, should I wait for them to contact me or just file an amendment now? I'm wondering if it's better to fix it proactively or wait.

I can definitely relate to your panic - I had a similar situation last year where I received my 1095-A after filing! The good news is this is absolutely fixable, and you're not alone in this predicament. First, don't stress too much about the timing. You have up to 3 years to file an amended return, so you're not under any immediate deadline pressure. The two different 1095-A forms you received likely indicate either a correction was made to your original form, or you had some kind of coverage change during 2024 (like switching plans mid-year, adding/removing family members, or moving to a different area). Here's what I'd recommend doing: 1. Look carefully at both forms - one might be marked as "corrected" or have different effective dates 2. Call your marketplace (the phone number should be on the forms) to clarify which form is the correct one to use 3. Once you know which form to use, file Form 1040-X to amend your return 4. Include Form 8962 (Premium Tax Credit) with your amendment The key thing is that the IRS already has this information from your insurance company, so it's much better to proactively fix this than wait for them to send you a notice asking about the discrepancy. You've got this!