I'm currently going through a similar adoption process and wanted to share what our financial advisor told us about HSA planning with adopted kids on Medicaid. One strategy we're considering is keeping our HSA contributions at the family level now while the kids are young, then potentially switching some of our adopted children to our HDHP when they age out of the adoption Medicaid benefits (usually around 18-21 depending on your state). This gives us flexibility to use HSA funds for their medical expenses once they're on our plan, while still maximizing our tax advantages during the years when Medicaid covers most of their needs. Just something to think about for long-term planning! Also, our adoption worker mentioned that some families find it helpful to set up a separate savings account specifically for medical expenses that might not be fully covered by Medicaid - things like travel for specialist appointments, alternative therapies, or medical equipment that might have waiting periods. That way you're not tempted to accidentally use HSA funds inappropriately.

This is such a thoughtful question, and it sounds like you're really doing your homework on this! I'm a CPA and work with a lot of families in similar situations. The good news is that you can absolutely keep your HSA and continue maximizing contributions. The key point that others have touched on is correct - your HSA eligibility is based on YOUR coverage under a qualifying HDHP, not your dependents' coverage. As long as you, your wife, and your biological daughter remain on your HDHP, you can continue contributing at the family rate ($7,750 for 2025). Just remember the "tax dependent" rule for HSA distributions - you can only use HSA funds tax-free for qualified medical expenses of people who are your tax dependents AND covered under your HDHP. So while your adopted children will be your tax dependents, since they'll be on Medicaid rather than your HDHP, you can't use HSA funds for their medical expenses without tax consequences. One additional consideration: make sure to review your HDHP's family coverage. Some plans have specific enrollment requirements about adding new dependents. You'll want to coordinate with HR about whether you want to add the adopted children to your HDHP immediately or keep them on Medicaid. In many cases, keeping them on Medicaid is actually better coverage for kids who may have ongoing medical needs from their foster care experience. Congratulations on your growing family!

Has anyone used a corrective distribution to fix excess employer contributions in a solo 401k? My understanding is you need to file Form 1099-R with a specific code to show you're correcting an excess. But I'm not sure if this applies to employer side contributions or just employee.

I'm dealing with a similar excess contribution situation right now. One thing I learned from my tax advisor is that you should also check if your excess contribution might qualify for the "deemed distribution" rule under IRC Section 415. If your total contributions (employee + employer) exceeded the annual limits, sometimes the IRS allows you to treat the excess employer contribution as a taxable distribution rather than subject to the 6% excise tax. This doesn't make it deductible, but it might be a better outcome than paying the excise tax annually. Also, make sure you're calculating your maximum employer contribution correctly for next year. As a self-employed person, your employer contribution limit is based on your net self-employment income minus half of your self-employment tax, not your gross 1099 income. A lot of people trip up on this calculation.

From my experience last year with an offset situation, WMR is absolutely the slowest system to update with the correct remaining amount. I had a $2,400 refund with a $800 offset for an old debt, and it took WMR a full 9 days to show the correct $1,600 remainder amount. What's really important to understand is that the actual processing and deposit of your remaining refund happens independently of what WMR displays. My remaining $1,600 was deposited exactly on day 14 after approval, even though WMR was still showing confusing information. The key is to focus on the timeline they gave you (March 17th in your case) rather than what WMR shows. Also, definitely check your tax transcript - it updated within 48 hours and showed exactly what was happening with codes 898 and 776, which gave me peace of mind while waiting for WMR to catch up.

I'm going through this exact same situation right now! Got my approval notice 5 days ago showing an offset, and I've been checking WMR constantly hoping to see the remaining amount. Reading through everyone's experiences here is really helpful - sounds like I need to stop obsessing over WMR and just trust that my remaining refund will arrive by the date they gave me (March 20th in my case). The transcript suggestion is great too - I had no idea that would show more detailed information faster than WMR. It's frustrating that these systems don't talk to each other better, but at least now I know this delay is totally normal. Thanks everyone for sharing your timelines and experiences!

Pro tip: save your transcripts as PDFs whenever you can get in. learned this the hard way

You might be able to call them at 800-908-4490 to get help with access. but goodluck getting thru to anyone 💀

Umm sorry if this is a dumb question, but I'm in the same situation and wondering how box 5 on the 1098-T (scholarships/grants) affects all this? I had a scholarship for part of my undergrad semester and it's showing in box 5. Do I need to subtract that from my qualified expenses before calculating AOTC?

Just wanted to add some clarity since I see some confusion in the comments. As a tax professional, I can confirm that you absolutely cannot claim both AOTC and LLC in the same tax year for the same student - this is a hard IRS rule. However, there's an important nuance about your situation: since your undergraduate expenses occurred in the first part of 2024 and your graduate expenses in the second part, you need to be strategic about which credit to use. If you've only used AOTC for 3 years so far, you have one year of eligibility left, but it can ONLY be applied to undergraduate expenses. Your graduate school expenses would not qualify for AOTC at all - they could only qualify for LLC. So your real choice is: use your final year of AOTC on just your $7,200 undergrad expenses, or use LLC on the combined $25,700 total expenses. Run the numbers both ways - AOTC might give you up to $2,500 (and up to $1,000 is refundable), while LLC gives you 20% of qualified expenses up to $2,000 total. Given your amounts, AOTC on just the undergrad expenses would likely be more beneficial than LLC on everything.