Has anyone here actually gone through with a large Roth conversion in a low income year? I'm considering doing about $35k conversion but I'm worried I'll regret it when tax time comes.

This is exactly the kind of situation where proper tax planning can save you thousands! With your $41k income and massive capital losses, you're actually in a unique position. While those losses can't directly offset Roth conversion income (as others mentioned), your low current income means you're in a great tax bracket for conversions. I'd strongly recommend running the numbers on converting enough to fill up your 12% tax bracket - probably around $8k based on your current income. Even though you'll pay taxes on the conversion, you're essentially "prepaying" taxes at today's lower rates rather than potentially higher rates in retirement. The key insight here is that your capital losses will carry forward for years, giving you ongoing $3k annual deductions against ordinary income. This means your effective tax rate might be even lower than the bracket suggests. Don't let the losses go to waste - use this low-income year strategically for tax-advantaged growth!

Thanks for sharing your recent experience! It's really helpful to have current data points like yours. The consistency you're seeing - DDD on 3/28, processed same day, received 3/29 - matches what I've been telling people to expect this tax season. The real-time portal updates are a huge improvement from past years when we were all just guessing about timing. For anyone reading this thread, Anita's experience is pretty typical of what I've seen with most filers this year. The key is that SBTPG has gotten much more efficient, but your bank's processing time is still the variable that can add an extra day or two. If you're planning around needing your refund money, I'd still recommend assuming 1-2 business days after your DDD rather than counting on same-day availability.

Welcome to the community, Brandon! You picked a great year to start filing - the SBTPG process has definitely improved compared to horror stories from 2020-2021. Just a few quick tips from someone who's been through this process multiple times: 1) Check your transcript on irs.gov about a week after filing to see when your DDD gets assigned, 2) Once you have a DDD, expect your money 1-2 business days later in most cases, and 3) Don't panic if it takes the full 48 hours - that's still normal. The taxpayer.sbtpg.com portal that others mentioned is your best friend for peace of mind. You can literally watch your refund move through each step of the process. Good luck with your first tax season!

This thread has been incredibly helpful! I'm dealing with a very similar situation where my employer included my HSA contributions in Medicare wages but excluded them properly from federal income tax wages. After reading through all the detailed advice here, I feel much more confident about how to approach this. I'm planning to follow the systematic approach that several people outlined: first contact our payroll department with the specific IRC Section 125 and Publication 969 references, calculate the exact overpayment amount (my $2,800 HSA contribution × 1.45% = $40.60), and request a W-2c correction. If they're unresponsive, it's reassuring to know I can use Form 8959 to make the adjustment on my tax return while still pursuing the corrected W-2. The point about checking previous years is also well-taken - I'm going to review my 2023 and 2022 W-2s tonight to see if this has been an ongoing issue. Thanks to everyone who shared their experiences and expertise. It's amazing how a seemingly small payroll configuration error can affect so many people, but at least now I know exactly how to address it!

I want to add some perspective from the IRS side of this issue. I'm a retired IRS revenue agent who handled payroll tax matters for over 20 years, and HSA/Medicare wage reporting errors were surprisingly common during my time there. What many people don't realize is that when employers make this mistake, they're not just incorrectly withholding from employees - they're also overpaying their own matching Medicare taxes to the IRS. This creates a paper trail that makes these errors relatively easy for us to spot during payroll tax examinations. The good news is that the IRS has streamlined procedures for correcting these specific Section 125 reporting errors. When an employer files Form 941-X to correct their quarterly payroll tax returns (which they should do when issuing W-2c forms), the system automatically flags it as an HSA/cafeteria plan correction, which expedites processing. For employees dealing with uncooperative employers, I'd recommend mentioning Form 941-X in your communications. Let them know they'll need to file this form to correct their own overpaid employer Medicare taxes. Sometimes employers don't realize they have money sitting with the IRS that they're entitled to get back, which provides additional motivation to fix the W-2 error promptly. The key is being persistent but professional. These errors are almost always system configuration issues rather than intentional mistakes, so approach it as helping them identify a problem rather than accusing them of wrongdoing.

Reading through all these responses has been incredibly helpful! I just wanted to add one more practical consideration that might be worth thinking about - the logistics of coordinating the sale while going through a divorce. Make sure you and your spouse are on the same page about timeline expectations and decision-making authority. In my experience helping clients through similar situations, disagreements about listing price, accepting offers, or timing can create unnecessary stress during an already difficult time. Consider establishing some ground rules upfront - like maybe both parties need to agree on any offer within X% of asking price, or that you'll both be copied on all communication with the realtor. Having these boundaries in place can prevent small real estate decisions from becoming bigger relationship conflicts. Also, think about who will handle the day-to-day responsibilities during the listing period - showing the house, minor repairs, etc. If one person is still living there, they'll naturally take on more of this burden, so make sure that's acknowledged and fair. The tax benefits you're getting with both exclusions are fantastic, and it sounds like you have a solid plan. Just make sure the execution goes smoothly too! Having clear expectations about the sale process will help ensure you both can focus on moving forward with your lives.

This has been an incredibly thorough and helpful discussion! As someone who went through a similar situation about two years ago, I wanted to add one final perspective that might be useful. The advice about both of you being able to claim your individual $250k capital gains exclusions is absolutely correct, and in your case with a $500k gain, it works out perfectly. What I wish I had known at the time was to also consider the timing of when you'll each be house-hunting again. If you're planning to buy new homes relatively soon after the divorce, having that cash from the sale proceeds can be incredibly valuable for down payments, especially in today's interest rate environment. The flexibility of having liquid assets versus being tied to a property that one of you might not really want or be able to afford long-term ended up being huge for both my ex and me. Also, don't underestimate the psychological benefit of both of you getting to choose your next living situation based on your actual post-divorce needs and preferences, rather than one person being "stuck" with a house that was chosen when you were a couple with different priorities and financial circumstances. It sounds like you're making a well-informed decision. The combination of favorable tax treatment, clean break benefits, and maximum flexibility for your next chapter makes selling and splitting the proceeds a strong choice. Best of luck with everything!

I just wanna add one more thing about wash sales since people keep mentioning them. The rule applies across ALL your accounts, even retirement accounts! I found this out the hard way. Sold TSLA at a loss in my regular brokerage account then bought it back in my Roth IRA 2 weeks later thinking I was being clever. Nope! IRS disallowed the loss. The wash sale rule doesn't care which account you rebuy in - if it's within 30 days and substantially identical, the loss gets disallowed.

One thing that really helped me understand this better was learning about the "netting" process that happens on Schedule D. The IRS requires you to first net all your short-term gains and losses together, then net all your long-term gains and losses separately. Since all your trades were within the same year, they're all short-term. So your $800 in gains minus $300 in losses gives you a net short-term capital gain of $500 - that's what gets taxed at your ordinary income rate. The $3,000 deduction limit only kicks in when you have an overall net loss across all your capital transactions for the year. Think of it as: gains and losses offset each other first, then any remaining net loss (up to $3,000) can reduce your regular taxable income. Keep track of your cost basis for everything - you'll need the purchase date, sale date, purchase price, and sale price for each transaction when you file. Many brokers provide this in a consolidated 1099-B form, but it's good to keep your own records too.