


Ask the community...
I think there's confusion about what "lived with" means for IRS purposes. It doesn't just mean physically under same roof. If spouse is away for school or job but its temporary and you're still financially connected (like paying their rent!!), you're considered living together. I've been through this exact situation. Wife in residency in different state. I paid some of her bills. IRS considers that LIVING TOGETHER for MFS status. Had to remove roth contributions and pay penalty. Really sucked. If you already contributed to Roth and need to file MFS as "lived together" you should look into removing the excess contribution ASAP before you file. Theres a process for it to avoid bigger penalties.
What's the process for removing excess Roth contributions? I might be in a similar situation and want to fix it before filing.
You need to contact your Roth IRA custodian (like Vanguard, Fidelity, etc.) and request removal of the excess contribution plus any earnings on that excess amount. They'll send you Form 1099-R showing the distribution. If you remove it by the tax filing deadline (including extensions), you won't owe the 6% excise tax on the excess contribution. But you'll still need to pay regular income tax on any earnings that are distributed along with the excess contribution. The key is doing this BEFORE you file your return. If you wait until after filing, it gets more complicated and you might still owe penalties. Most custodians are familiar with this process since it happens fairly often with income limit issues.
Based on your description, it sounds like you and your husband would likely be considered "living together" for IRS purposes despite having different addresses. The fact that you're helping pay for his student housing and co-signed the lease creates a strong financial connection that the IRS considers when determining living status. The IRS generally views educational separations as temporary, not permanent living apart situations. Since you're financially supporting his housing arrangements, this reinforces that you're maintaining a connected household even though you're physically in different locations. For your Roth IRA situation, this means you'd be subject to the much lower income limits that apply to Married Filing Separately filers who lived together ($10,000 modified AGI phase-out range for 2023). If you've already made contributions above this limit, you'll want to remove the excess contribution before filing to avoid the 6% annual penalty. I'd recommend getting official guidance on your specific situation, either through a tax professional or by contacting the IRS directly, given the financial implications of getting this wrong.
This is exactly what I was afraid of hearing, but thank you for the clear explanation. The financial connection aspect makes a lot of sense - if I'm co-signing leases and helping with housing costs, we're obviously still functioning as a connected household even if we're not physically together. I really appreciate everyone's advice about removing the excess Roth contribution before filing. I had no idea there was a 6% annual penalty that could keep applying if I don't fix this quickly. I'm definitely going to contact my IRA custodian first thing Monday morning to start that process. It's frustrating that the tax code doesn't seem to account for modern situations where couples maintain separate residences for legitimate reasons like education, but I'd rather deal with the reality of the rules than risk penalties from wishful thinking about how they should work.
Did anybody mention TSP loans? Since you're working for the federal government now, once you've been contributing to your TSP for a while, you can take loans from it without the tax penalties of an early withdrawal. Interest rates are pretty reasonable too, and you pay the interest to yourself. Might be something to consider for future needs rather than tapping retirement accounts and paying penalties.
TSP loans are great but you can't get them from old accounts like the 403b OP is asking about. Also, there are restrictions - you have to pay it back within 5 years unless it's for a primary residence, and if you leave federal service with an outstanding loan, you either have to repay it quickly or it becomes a taxable distribution with penalties.
Hey Freya! I was in a similar situation a couple years back with an old 403b from a teaching job. One thing I learned that might help - since you're now a federal employee, you might want to consider if you qualify for any of the hardship exceptions that could waive the 10% penalty. Things like unreimbursed medical expenses, higher education costs, or even certain unemployment situations can qualify. Also, don't forget about state taxes! Depending on which state you're in, you could owe anywhere from 0% to 10%+ on top of federal taxes. Some states don't tax retirement distributions at all, while others treat them as regular income. The partial rollover idea mentioned earlier is really smart too - you could roll most of it into your TSP (yes, you can roll a 403b into TSP!) and just take out what you absolutely need in cash. That way you minimize the tax hit while still getting some immediate funds. Just make sure to get everything in writing from your 403b administrator about exactly how much will be withheld and when you'll receive the funds. Some plans can take weeks to process distributions.
This is really helpful, Paolo! I didn't know you could roll a 403b directly into TSP - that's actually a great option since I'm planning to build up my TSP anyway. Do you know if there are any restrictions on rolling from a 403b to TSP, like waiting periods or contribution limits that would apply? And regarding the hardship exceptions, would having to pay off some credit card debt from when I was between jobs potentially qualify, or does it have to be more specific things like medical expenses?
I was in the same boat last year and wish someone had told me this - the apps are now reporting this data directly to states! My friend got a notice from Indiana asking why he didn't file a return there, when he had only placed a few bets while driving through the state. The betting apps are required to track your physical location for legal compliance reasons, and that data is increasingly being shared with tax authorities.
This is such a timely question! I just went through this exact situation for my 2024 taxes. I'm registered in Texas but placed winning bets while traveling for work in Nevada, Louisiana, and Arizona. After consulting with a tax professional, here's what I learned: technically, you're supposed to file nonresident returns in each state where you physically placed winning bets, regardless of where you're registered with the app. The key factor is your physical location when the bet was placed, not your registration address. However, the enforcement is still inconsistent. Some states are getting more aggressive about tracking this (especially states with higher tax rates who want their piece), while others haven't caught up yet. The apps do track your location for regulatory compliance, and this data is increasingly being shared with state tax authorities. For your situation, I'd recommend keeping those detailed records you mentioned and filing properly in each state where you had significant winnings (maybe $500+ threshold). You can then claim credits on your Ohio return for taxes paid to other states to avoid double taxation. If we're talking smaller amounts, the risk might be low, but with the trend toward more enforcement, it's probably safer to file correctly from the start. The hobby vs. professional distinction doesn't change the sourcing rules - winnings are still taxable where the activity occurred regardless of how you classify your gambling activities.
This is really helpful, thank you! I'm curious about that $500+ threshold you mentioned - is that an official guideline or just a practical rule of thumb? I've been tracking everything meticulously but some of my individual state winnings are in the $200-400 range. Also, when you say the apps share location data with tax authorities, do you know if that's automatic reporting or only during audits? I want to make sure I'm being compliant but also don't want to file unnecessary returns if the risk is truly minimal for smaller amounts.
The $500+ threshold I mentioned is more of a practical rule of thumb that many tax professionals use rather than an official guideline - it's based on the cost-benefit analysis of filing multiple state returns versus the potential penalty risk for smaller amounts. Each state technically has its own filing requirements regardless of amount. Regarding the data sharing, it varies by state and app. Some states have formal information sharing agreements with the major betting platforms (like Nevada and New Jersey), while others only request this data during audits or investigations. The trend is definitely moving toward more automatic reporting though - similar to how casinos report W-2Gs for certain winnings thresholds. For your $200-400 range winnings, I'd suggest checking the specific filing requirements for each state. Some states like Pennsylvania require filing for any amount, while others have higher thresholds. You might also consider consulting with a tax professional who specializes in multi-state returns - the cost of professional advice could be worth it given the complexity and potential future enforcement trends.
Has anyone actually calculated the total difference between employer pretax health insurance vs marketplace plans when considering ALL factors? I'm in similar situation but also wondering about: 1. Quality of network (my employer plan sucks) 2. Premium differences 3. Tax implications 4. Out-of-pocket differences My employer takes $515/month pretax but the deductible is $7000! Marketplace plan is $560/month but deductible only $3500. Trying to figure out total cost including taxes.
The pretax employer premium at $515/month saves you roughly 30% in taxes depending on your tax bracket (federal + FICA). So that's about $154/month in tax savings. Marketplace: $560/month = $6,720/year Employer: $515/month = $6,180/year Tax savings with employer: ~$1,854/year So financially, your marketplace plan costs about $2,394 more annually when including lost tax benefits. BUT, the $3,500 lower deductible could make up for that if you expect to need significant healthcare. If you hit both deductibles, the marketplace plan would actually save you about $1,106 annually.
One thing to consider that hasn't been mentioned yet is whether your employer offers a Health Savings Account (HSA) option with their high-deductible health plan. If they do, that's another significant tax advantage you'd lose by going to marketplace coverage. HSA contributions are triple tax-advantaged: deductible going in, grow tax-free, and withdrawals for qualified medical expenses are tax-free. For 2025, you can contribute up to $4,300 for individual coverage or $8,550 for family coverage. This could potentially offset some of the higher deductible concerns while maximizing your tax benefits. Also worth checking if your employer contributes anything to an HSA on your behalf - that's essentially free money you'd be giving up. Some employers contribute $500-2000 annually to employee HSAs, which changes the math considerably when comparing total compensation packages. If HSA isn't available with your current plan, that might actually strengthen the case for switching to marketplace coverage, especially if you can find an HSA-eligible high-deductible plan there.
This is a really important point about HSAs that I hadn't considered! I don't think my employer offers an HSA option with their plan - it's just a regular PPO with high premiums and high deductible (worst of both worlds honestly). @Madeline Blaze Do you know if marketplace plans can be HSA-eligible? I ve'heard mixed things about whether you can open your own HSA if you buy insurance outside of your employer. If I could get a high-deductible marketplace plan AND contribute to an HSA, that might actually make the math work out better even with the tax disadvantage on premiums. Also wondering if anyone knows - can you contribute to an HSA if you re'eligible for your employer s'health plan but choose not to take it? The HSA triple tax advantage sounds amazing if I can actually access it.
Anastasia Popova
Has anyone considered the implications of company acquisition before full vesting? With my previous startup, we were acquired 3 years into my 4-year vesting schedule. My colleagues with ISOs had to scramble to exercise, while those with RSAs just had their vesting accelerated. The tax situations were dramatically different.
0 coins
Sean Flanagan
ā¢This is such an important point! At my company, we got acquired and those with RSAs who filed 83(b) elections made out way better. The acquisition agreement included accelerated vesting, and since they'd already paid tax on the initial low valuation, all the appreciation was capital gains. ISOs holders had to quickly exercise and got hit with huge ordinary income tax bills.
0 coins
Keisha Williams
This is exactly the kind of complex equity compensation decision that can have huge long-term tax implications. Based on what you've shared, the RSA with 83(b) election route seems compelling given the current low valuation at $12,000. A few additional considerations for your situation: First, make sure you understand your company's vesting acceleration policies in case of acquisition or termination scenarios. Some companies have "double trigger" acceleration that could protect you even if you leave early. Second, consider your personal cash flow - paying 40% tax upfront ($4,800) versus having $12,000 tied up in ISO exercise costs later. One thing I'd strongly recommend is getting clarity on the forfeiture provisions if you do choose RSAs and leave before full vesting. While you can generally claim unvested shares as a capital loss (as others mentioned), the specific mechanics can vary by company and you'll want documentation showing the forfeiture. Given the 30-day deadline for 83(b) elections, you might want to model out a few scenarios quickly. The stories here about AMT hits with ISOs are real - I've seen colleagues get burned badly when company valuations spiked but liquidity never materialized.
0 coins
Dmitry Ivanov
ā¢Great breakdown! I'm curious about the "double trigger" acceleration you mentioned. How common is this in startup equity packages? And does it typically apply to both RSAs and ISOs, or is it more favorable for one type over the other? This seems like it could be a major factor in the decision-making process, especially for someone like the original poster who's concerned about leaving before full vesting.
0 coins