This is really helpful! Quick question - does the corrective distribution also get hit with the 10% early withdrawal penalty if you're under 59.5?

Great question! Generally no, corrective distributions from failed ADP tests are NOT subject to the 10% early withdrawal penalty, even if you're under 59.5. These are considered plan corrections required by law, not voluntary early withdrawals. However, the distribution is still taxable as ordinary income in the year you receive it. The key is making sure your 1099-R has the correct distribution code (usually "8" for excess contributions) rather than "1" which would incorrectly trigger the penalty. @bb0ad1cb2c9e can probably confirm this from the plan administration side, but this is one of the few situations where you can get money out of a retirement account early without the penalty.

This is excellent advice about documentation! I'm dealing with a similar ADP test situation and hadn't thought about keeping such detailed timeline records. One thing I'd add - also save any emails or letters from your former employer's HR department about the test failure. My company sent a pretty generic notification letter, but it had important details about the calculation methodology and correction timeline that I almost threw away. Turns out those details might be important if there are ever questions about why the distribution was necessary. @28137e76d511 do you know if there's a standard timeframe employers have to notify employees about ADP test failures? Mine took almost 8 months after the plan year ended to let me know.

This is really helpful information! I'm dealing with the same issue right now. How long did it take to get TurboTax to agree to the three-way call? Every time I call their customer service, they just tell me to contact my bank. Also, did your bank charge you any fees for the rejected check? Mine is threatening a $35 returned item fee and I'm worried about additional costs on top of this already stressful situation.

Welcome to the contractor tax world! Your "tax home" question is really important to get right. For delivery drivers, your tax home is typically the general area where you conduct your regular business activities - so that 30-mile radius you mentioned would likely be considered your normal business area. The key test for meal deductibility is whether you're traveling far enough from your tax home that you need "substantial rest" during the trip. A 50+ mile rural delivery might qualify if it's genuinely taking you away from your normal operating area for an extended period (like most of a day), but a quick there-and-back trip probably wouldn't meet the threshold even at that distance. The IRS looks at factors like: How long are you away? Do you need to stop for rest? Is this outside your regular service area? It's not just about mileage - it's about whether the trip requires you to be away from your normal business routine long enough that meal expenses become a necessary business cost rather than personal sustenance. Definitely prioritize that mileage tracking though - at 67 cents per mile, even your regular local deliveries add up to significant deductions!

This is such great practical advice! The separate business accounts idea is brilliant - I've been mixing everything together and it's a nightmare to sort through. Quick question about the phone expense deduction - how do you calculate what percentage is "business use" for delivery work? I use my phone for GPS navigation, communicating with dispatch, and taking photos of deliveries, but also personal stuff obviously. Is there a standard percentage contractors typically use, or do you need to track actual usage somehow?

This is such an important distinction that I wish someone had explained to me earlier! I made the mistake of assuming my F-1 visa status automatically meant I should file 1040-NR, but after being in the US for several years, I actually passed the substantial presence test and should have been filing as a resident alien. The IRS substantial presence test calculator you mentioned is really helpful - it takes into account not just the current year but also partial days from the previous two years. For anyone on F-1 status, remember that your first 5 calendar years don't count toward the substantial presence test, but once you hit year 6, you need to start calculating. I ended up having to amend two years of returns once I realized my mistake. Definitely worth spending the time upfront to get your tax status right rather than dealing with amendments later. And yes, if your employer issued a W-2 instead of a 1042-S, that's usually a strong indicator they were treating you as a resident for tax purposes.

I went through a very similar situation last year with my spouse on H-4 status! The ITIN vs SSN issue doesn't change which forms you need to use - it's really about your tax residency status determined by the substantial presence test. If you both meet the substantial presence test (which is likely if you've been in the US most of the year), you can actually file a joint return using Form 1040 (not 1040-NR) even if one spouse only has an ITIN. You'd make the election to be treated as resident aliens for tax purposes by attaching a statement to your first joint return. However, if one or both of you are still considered nonresident aliens, then you'd generally need to file separately - the nonresident spouse would use 1040-NR and the resident spouse (if applicable) would use 1040. The election to be treated as residents can be beneficial because it allows joint filing (often resulting in lower taxes) and access to deductions/credits that nonresidents can't claim. But once you make this election, it applies to all future years until you revoke it or become actual residents. I'd recommend running the numbers both ways or consulting with someone who specializes in nonresident returns before deciding. The tax software mentioned earlier in this thread (like Sprintax or GlacierTax) should be able to help you evaluate both scenarios.

This is incredibly detailed and practical advice - thank you! As someone new to navigating HSA rules, the specific terminology recommendations are really valuable. I wouldn't have thought about the importance of using precise medical language like "functional impairment" versus more general descriptions. Your point about the 85-pound weight loss actually strengthening the case is reassuring. It helps frame this as a medical consequence of significant body changes rather than an elective procedure, which seems important for IRS purposes. I'm curious about the before/after photos suggestion - would those need to be taken by the medical provider, or could we document the condition ourselves? And should we be asking our surgeon specifically about this during our consultation, or is it something most surgeons automatically include in their records for these types of procedures? Also, since you work in medical billing, do you have any insights on timing? Should we get all this documentation lined up before scheduling the surgery, or is it typical to get the Letters of Medical Necessity after the procedure is already planned but before it's performed?

The photos should definitely be taken by medical staff as part of your official medical records - patient-taken photos won't carry the same weight with the IRS. Most surgeons who regularly do diastasis recti repairs are familiar with this documentation requirement, but it's worth specifically asking during your consultation. Regarding timing, I always recommend getting the Letters of Medical Necessity before scheduling surgery. Here's why: if for some reason the documentation doesn't support HSA qualification as strongly as you hoped, you'll want to know that before committing to the procedure date and potentially scrambling to find alternative funding. The ideal timeline is: 1) Get letters from both your PCP and surgeon stating medical necessity, 2) Review those letters to ensure they use the right terminology and address functional impacts, 3) Schedule the surgery with confidence that your HSA withdrawal will be justified. Also, make sure both letters specifically mention that this is repair of muscle separation resulting from significant weight loss. That medical context is crucial - it shows this isn't cosmetic enhancement but correction of a structural problem caused by dramatic body changes. The IRS tends to view procedures more favorably when there's a clear medical cause like pregnancy, weight loss, or injury rather than general aging or appearance preferences. One last tip: keep copies of everything related to your husband's weight loss journey too - medical records showing his starting weight, any physician-supervised weight loss programs, documentation of the timeline. This creates a complete medical narrative that supports the necessity of the repair.

Great question about audit likelihood! From what I've researched and heard from others, HSA withdrawals for medical expenses aren't automatically flagged for review unless they're unusually large or frequent. The IRS mainly seems to audit HSA withdrawals when they suspect non-medical use. That said, it's always better to be prepared. The documentation everyone's mentioned here - Letters of Medical Necessity, medical records, receipts - is really your insurance policy against any questions that might arise. Regarding timing, I'd recommend waiting until you have the final bills before making the HSA withdrawal. This way you know exactly how much to withdraw and you'll have the complete paper trail showing the expense, payment, and withdrawal all align. Plus, some HSA administrators are more accommodating when you can show them the exact medical bills you're paying for. I'm also planning to use HSA funds for a similar procedure after reading through this thread. The advice about focusing on functional impairment in the medical documentation has been a game-changer for how I'm approaching this with my doctors. It's reassuring to see so many people successfully navigate this situation!