As someone who's been through this exact situation, I want to warn you - don't just assume the insurance company is reporting correctly. My disability insurer reported my benefits as fully taxable for 3 years before I caught the error. Had to file amended returns for all three years. The definitive test: If YOU paid the premiums with after-tax money, the benefits are NOT taxable. If your EMPLOYER paid OR if you paid with pre-tax money (like through a section 125 cafeteria plan), then the benefits ARE taxable. Something else to try: Check your last pay stubs before you went on disability. If the disability premium was deducted AFTER taxes were calculated, that's evidence you paid with after-tax dollars.

I'm dealing with a very similar situation and want to share what I learned after months of research. The key is understanding that the insurance company often defaults to reporting ALL disability benefits as taxable unless they have specific documentation proving otherwise. Since your employer is out of business, you'll need to build your case with whatever documentation you can gather. Here's what worked for me: 1. Request your Social Security earnings record (Form SSA-7050) - this shows your reported wages for each year and can help prove whether disability premiums reduced your taxable income or not. 2. If you have ANY old tax software files or tax prep documents, those sometimes contain more detailed breakdowns of deductions than the actual returns. 3. Contact your state's insurance commissioner - they can sometimes compel the insurance company to provide better documentation, especially if there's a pattern of incorrect reporting. The fact that you're getting "3rd Party Sick Pay" on your W-2 suggests the insurance company is treating it as taxable by default. But if you truly paid 100% with after-tax dollars, you have a strong case for getting this corrected. Don't give up - I recovered over $4,000 in overpaid taxes once I proved my case. The insurance company's past citations for incorrect reporting actually work in your favor if you need to escalate this to tax authorities.

As a newcomer to this community, I want to thank everyone for this incredibly detailed discussion! I'm facing a similar situation with some Amazon shares I want to gift to my daughter, and I was completely lost on the timing rules. The explanation about "dominion and control" being the key factor makes so much sense - I was overthinking this and assumed it had to be based on when the actual transfer completed in the system. It's actually quite logical that the IRS looks at when YOU as the donor have done everything in your power to complete the gift. One quick follow-up question: if I'm mailing transfer forms to multiple family members (different gifts), do they all need to be mailed on the same date to use the same stock valuation, or can I stagger them over several days if I want different valuations? I'm trying to optimize around some upcoming earnings announcements that might affect the stock price. Also echoing what others said about documentation - I'll definitely be using certified mail and keeping screenshots of the daily high/low prices. This thread has probably saved me from making some costly mistakes!

As someone new to this community and dealing with stock gifts for the first time, this discussion has been incredibly enlightening! I'm planning to gift some Nvidia shares to my grandchildren and was completely overwhelmed by the tax implications and timing rules. The consensus here about the "dominion and control" principle makes perfect sense - the gift is complete when you mail the properly executed transfer forms, not when the broker processes them. This actually protects donors from being at the mercy of processing delays that could affect valuations. I appreciate all the practical advice about documentation too. Using certified mail, keeping proof of mailing dates, and documenting the daily high/low prices seems like a small investment for significant peace of mind. One thing I'm wondering about - for those who mentioned using services like taxr.ai or Claimyr, do you think these are worth it for relatively straightforward gift situations, or are they more valuable for complex scenarios? My situation seems similar to the original poster's, where I just need clarity on basic timing and valuation rules. Thanks to everyone for sharing their experiences - this community knowledge is invaluable for navigating these tax complexities!

Has anyone successfully gotten their employer to reduce the withholding BEFORE paying the severance? I'm about to get laid off (they told us it's coming) and want to avoid this exact situation.

The withholding on your severance is unfortunately very typical. I went through this exact same shock when I was laid off 6 months ago - $42k severance with over $18k withheld. What's happening is your payroll system is treating that lump sum as if it's your new regular pay rate, so it's withholding taxes as if you suddenly make $444k annually instead of your actual salary. Here's what I learned: most of that overwithholding WILL come back to you as a refund when you file taxes, assuming your total annual income doesn't actually put you in those higher brackets. In my case, I got back about $11,500 of the $18k they took. One immediate thing you can try - contact your former employer's payroll department and ask if they can process an amended W-4 for any remaining severance payments. Some companies will do this if you haven't received the full amount yet. Also keep very detailed records of everything because you'll need to track this carefully for your tax filing. The cash flow hit is brutal when you're already dealing with job loss stress, but the IRS math will work itself out in your favor come tax time.

Don't forget to check if this affects your eligibility for premium tax credits if you purchased health insurance through the marketplace! If your employer offered this QSEHRA benefit, it might impact your subsidy calculations.

I'm a tax preparer and see this confusion about FF codes pretty frequently. The $2,400 represents the annual limit your employer made available through their QSEHRA plan, not an amount you received or owe taxes on. This is purely informational for tax purposes. Here's what you should do: 1) Ask your employer for the QSEHRA plan documents and claims submission process, 2) Gather any medical expenses you paid out-of-pocket in 2024 (doctor visits, prescriptions, dental, vision, etc.), and 3) Submit eligible expenses for reimbursement before any plan deadline. The fact that your employer and their payroll company seem unaware of this benefit is a red flag. Someone authorized this setup - possibly as part of a benefits package upgrade they didn't fully understand. Don't let their confusion cost you money you're entitled to claim back!

I actually just went through this exact same scenario a few months ago! My credit union closed unexpectedly right after I filed my return. What I learned is that you absolutely cannot update your direct deposit info once the return is filed - the IRS system is locked in at that point. When the deposit bounces back, they'll automatically mail you a paper check to your address on file, but here's the catch: it can take 6-10 weeks from the bounce date, not from when you originally expected your refund. I'd suggest setting up USPS informed delivery if you haven't already, and definitely double-check that your current address is on file with the IRS. Don't stress too much about visiting your old bank - there's really nothing they can do at this point since the account is closed. The waiting game is frustrating, but the check will eventually come!

I went through this exact situation two years ago when I switched from Bank of America to a local credit union right after filing. Here's what actually happened: the IRS attempted the direct deposit about 3 weeks after my return was accepted, it bounced back within 2 business days, and then it took another 4 weeks for the paper check to arrive. The total delay was about 6 weeks longer than if I had just requested a paper check originally. One thing I wish I had known - you can check if your refund has been converted to a paper check by calling the automated refund hotline at 800-829-1954. It won't tell you exactly when the check was mailed, but it will change from "direct deposit" to "check mailed" status. Also, make sure to update your address with both the IRS (Form 8822) and USPS mail forwarding just in case. The process is automatic once the deposit fails, so there's really nothing you need to do except wait and make sure your mailing address is current.