Don't beat yourself up about this - medical issues can definitely make it hard to stay on top of everything! The good news is that while you'll owe some penalty, it's really not that bad in your case. For a $127 excess contribution, you're looking at about $7.62 per year in excise tax (6% of $127). So for 2020-2023, that's roughly $30 total - definitely manageable. Here's what I'd recommend: First, call your HSA administrator and request removal of the excess contribution from 2020. They should be able to calculate any earnings on that $127 and remove both the excess and earnings. You'll get a 1099-SA for 2024 showing the withdrawal. Then file Form 5329 for each year 2020-2023 to pay the 6% excise tax. You don't need to amend your full returns - just file the 5329 forms separately with payment. The earnings portion will be taxable income on your 2024 return, but since it's been sitting there for years, it might actually be a decent amount that's been growing tax-free. One tip: when you call your HSA administrator, be very specific that you want to "remove excess contributions for tax year 2020" - use those exact words. Some customer service reps get confused if you just say you want to withdraw money.

I went through something very similar last year! Had an excess HSA contribution from 2019 that I didn't catch until 2023. The key thing to remember is that you're not in any serious trouble - this happens more often than you'd think, especially during job transitions. Here's what worked for me: I called my HSA provider (mine was with HSA Bank) and specifically asked for "removal of excess contribution for tax year 2020." They knew exactly what I was talking about and handled it within about a week. They removed both the $127 excess and any earnings attributed to it. The 6% excise tax isn't too painful on such a small amount - you're looking at about $7.62 per year, so maybe $30-35 total for all the years it's been sitting there. I filed Form 5329 for each affected year separately (didn't need to amend full returns) and just sent payment with each form. The earnings that get removed will show up as income on your 2024 return, but honestly after sitting in the HSA for 4+ years, there might be a nice little growth there that partially offsets the penalties. Don't stress too much about this - you're being proactive now and that's what matters. The IRS deals with HSA issues all the time and as long as you're making the effort to fix it, they're pretty reasonable about these situations.

Quick question for anyone who's dealt with this before - does the Kiddie Tax apply differently to different types of unearned income? The LLC sale in the original post is a capital gain, but would it be treated differently if it was dividend or interest income instead?

I've been through a similar situation with my nephew after his parents died in a car accident. The process can feel overwhelming, but you're on the right track asking these questions. One thing I learned that might help - make sure you have all the proper legal guardianship documentation ready when you file. The IRS may ask for proof of your guardianship status, especially with such a substantial amount of unearned income involved. Also, with $67K in capital gains, you might want to consider whether any estimated tax payments should have been made throughout the year. The Kiddie Tax can create a significant tax liability that might trigger underpayment penalties if not addressed properly. Have you consulted with a tax professional who specializes in guardianship situations? Given the complexity and the dollar amounts involved, it might be worth the investment to ensure everything is handled correctly. The cost of professional help could save you from potential issues down the road.

Don't forget that the American Opportunity Credit has an income phase-out! If your modified adjusted gross income is between $80,000-$90,000 (single) or $160,000-$180,000 (married filing jointly), the credit starts to phase out. After $90k/$180k you can't claim it at all. Lifetime Learning also has phase-outs but at different thresholds. Worth checking if you're near those income levels since it might affect your strategy.

This is a great discussion! One thing I'd add is to also consider timing your tuition payments strategically. Since education credits are based on when you actually pay the expenses (not when they're due), you might want to pay some spring semester costs in December vs January to optimize which tax year gets the benefit. Also, don't overlook textbooks and required course materials - these qualify for the American Opportunity Credit but NOT for the Lifetime Learning Credit. So when you switch to AOC in later years, make sure you're tracking those expenses too since they can add up to several hundred dollars per semester. And regarding the 529/credit coordination that others mentioned - one strategy is to use 529 funds for room and board (which don't qualify for education credits anyway) and pay tuition/fees out of pocket so you can claim the credits. Just make sure the 529 withdrawal amount doesn't exceed total qualified education expenses for the year or you'll owe taxes and penalties on the excess.

Just to add another perspective - I went through something similar when my parents helped me with living expenses during graduate school. One thing that really helped me was keeping simple records of these transfers, even though you don't need to report them as the recipient. I created a basic spreadsheet showing the dates, amounts, and noted they were "family support/gifts" in case I ever needed to explain them later. It's probably overkill, but having that documentation gave me peace of mind, especially since some of the amounts were substantial. The IRS rarely questions legitimate family gifts, but if they ever did, having a clear record showing these were regular support payments from your dad (not income from work or anything else) would be helpful. Plus it makes it easy to track that you're staying under the annual gift limits each year. Don't stress too much about it though - based on everything you've described, these are clearly gifts and you're handling everything correctly by not reporting them as income!

One thing I haven't seen mentioned yet is to make sure your dad understands the gift tax rules too, especially if he's helping multiple family members. The $18,000 annual exclusion is per recipient, so he can give $18,000 to you AND $18,000 to a sibling or other family member in the same year without any reporting requirements. Also, if your parents are married, they can each give you $18,000 annually (so $36,000 total per year) even if the money is coming from a joint account or just one parent's account. This is called "gift splitting" and just requires them to agree to it - no special paperwork needed unless they exceed the individual limits. Just wanted to add this in case it helps with future planning! Sounds like you're handling everything correctly though. Family support during school is one of the most common and straightforward gift situations.

Has anyone considered that TurboTax might be partially responsible here? I've used them for years and they typically have big warning messages about signing paper returns. There should have been something in the instructions when you printed everything out. If they didn't properly warn you, it might be worth contacting them to see if they'll cover some of the penalties through their accuracy guarantee.

I went through something very similar last year - forgot to sign my mailed return and got slammed with penalties. The stress was unreal! But here's what worked for me: First, definitely try the First-Time Penalty Abatement that others mentioned. It's a real thing and surprisingly effective if you have a clean filing history. When I called, I specifically said "I'm requesting First-Time Penalty Abatement under IRC Section 6651(a)" - using that exact language seemed to help. One thing I learned: the IRS considers your return "filed" when they receive a complete, signed return. Since yours wasn't signed initially, they treat the signed version as your actual filing date, which is why you're getting hit with late penalties even though you mailed it on time. Also, don't beat yourself up about the TurboTax thing. Their software is generally solid for calculations - this was just a processing oversight on the signing part. Focus your energy on getting these penalties removed rather than worrying about past calculations. The good news is that multiple people in this thread have successfully gotten these exact penalties removed, so there's definitely hope. Just be persistent and don't accept the first "no" if you get one!