I went through a very similar situation last year with my S-corp and COBRA premiums. The key thing that helped me was getting everything documented properly from the start. Here's what I learned: Yes, you can absolutely deduct the full $39,000 in COBRA premiums as a self-employed health insurance deduction, but the process matters. Your S-corp needs to reimburse you for those premiums you paid out of pocket (make sure this happens before December 31st). The reimbursement gets added to your W-2 income in Box 1 but not Boxes 3 and 5. For documentation, I created a simple board resolution stating that the company would reimburse health insurance premiums for employees. I kept copies of all my COBRA payment receipts, the reimbursement check from my business account, and a memo explaining the reimbursement. My CPA said this was more than sufficient. The amount might seem large, but it's a legitimate business expense. I claimed about $32,000 last year with no issues. Just make sure your accountant codes everything correctly on your W-2 and that you claim the deduction on Schedule 1 of your 1040, not as an itemized medical expense. One tip: If you're switching to ACA coverage when COBRA ends, you can handle those premiums the same way going forward.

This is exactly the situation I was in two years ago! The confusion you're experiencing is totally understandable because the rules for S-corp owners are different from sole proprietors, and not all tax professionals are familiar with the specifics. You're absolutely right that you can take the full deduction for your COBRA premiums. The process everyone outlined above is correct - have your S-corp reimburse you for the $39,000 you paid out of pocket, include it in your W-2 Box 1 income (but not FICA wages), then claim the self-employed health insurance deduction on your personal return. One thing I'd add that helped me sleep better at night: I also kept a spreadsheet tracking each monthly COBRA payment with dates, amounts, and confirmation numbers. When my S-corp reimbursed me, I referenced this spreadsheet in the memo line of the reimbursement check. It created a clear paper trail showing the business purpose of the reimbursement. The second accountant who told you COBRA doesn't qualify was simply wrong - there's no distinction in the tax code between regular health insurance and COBRA continuation coverage for this deduction. Don't let that bad advice cost you thousands in legitimate tax savings! Make sure to get this reimbursement processed before December 31st, and you'll be in great shape for your 2024 taxes.

As someone who's been through a similar situation, I can confirm what others have said here. The key is that your wife's loan forgiveness is tied to her continued employment (the 5-year vesting schedule), which makes it compensation rather than simple debt cancellation. I had a relocation loan from my employer that was forgiven 25% each year I stayed. Initially I thought it should be a 1099-C too, but after researching IRS guidance and consulting with a tax professional, I learned that because the forgiveness was contingent on me providing services (staying employed), it's treated as wages subject to all employment taxes including Medicare. The way to think about it: your wife is essentially being paid part of her compensation in the form of debt reduction instead of cash. If her employer gave her $6,500 in cash and she used it to pay down the loan, that would clearly be wages subject to Medicare tax. The IRS treats debt forgiveness the same way when it's employment-related. Your wife's HR department is handling this correctly. The Medicare tax does apply because this is earned income from services, not passive debt cancellation.

This thread has been incredibly informative! I'm dealing with a similar situation where my company provided me with an interest-free loan for professional development expenses that gets forgiven at 20% per year over 5 years as long as I remain employed. Reading through all the responses here, it's now clear to me that this should be treated as compensation on my W-2 rather than debt cancellation on a 1099-C, since the forgiveness is contingent on my continued employment. The distinction everyone's made between employment-related forgiveness versus general debt cancellation really clarifies things. I was initially confused because I thought any debt forgiveness should result in a 1099-C, but the key factor is that I'm essentially receiving compensation for services (staying employed) in the form of debt reduction rather than cash. This means it should be subject to all employment taxes including Medicare tax. Thanks to everyone who contributed - this discussion has saved me from having to spend hours researching IRS regulations or trying to get through to them on the phone!

Great question! I went through something similar with a data breach settlement a couple years ago. Here's what I learned from my experience: Most class action settlements from data breaches are indeed taxable because they're typically compensating you for potential economic harm or inconvenience, not physical injury. Even if the amount seems small, you're technically required to report it as "other income" on your tax return. A few things to keep in mind: - You'll likely get documentation from the settlement administrator explaining the tax treatment - If it's over $600, you should receive a 1099-MISC form - Keep all settlement paperwork with your tax records for at least 3 years - The settlement might be broken down into different components (some taxable, some not) Don't stress too much about the amount - whether it's $50 or $5,000, the reporting process is the same. Just make sure you report it properly to avoid any issues down the road. The IRS cares more about proper reporting than the actual dollar amount. If you end up with complex settlement documents that are hard to understand, consider consulting with a tax professional or using online resources to help interpret the tax implications specific to your settlement.

I just wanted to share my recent experience since this is such a timely topic! I received a settlement check last month from that Capital One data breach class action (took forever to finally get paid out). It was about $350, which was more than I expected. The settlement administrator sent really clear tax documentation explaining that the entire amount was considered taxable compensation for potential identity theft risks and time spent dealing with the breach aftermath. They specifically noted it should be reported as "other income" on Form 1040. What really helped me was that they broke down exactly WHY it was taxable - it wasn't compensating for any physical injury, but rather for the inconvenience and potential financial harm from having my data compromised. The documentation made it super clear that even without a 1099 form (since it was under $600), I still needed to report it. I ended up keeping a copy of all the settlement paperwork in a folder specifically for this tax year, along with screenshots of the emails I received. Better to be over-prepared than scrambling later if there are any questions! The good news is that reporting it was straightforward - just added it to the "other income" line with a note about what it was. No red flags or complications on my return.

This has been an incredibly thorough discussion! As someone new to dealing with merger tax implications, I really appreciate all the detailed guidance shared here. One thing I wanted to add that might be helpful for others in similar situations - if you're using tax software like TurboTax or TaxAct, make sure it can handle these types of stock reorganizations properly. I had a similar merger situation a few years ago and my tax software initially didn't have good support for reporting the conversion correctly. I ended up having to manually override several calculations and add specific codes on Form 8949 to properly reflect the tax-free reorganization treatment. It might be worth checking with your tax software provider or considering using a tax professional for the year you have this merger, especially if you have multiple lots with different acquisition dates like many of us seem to have. Also, for those who are still deciding between the all-cash vs 50/50 option, don't forget to factor in your current year tax situation. If you're already in a high tax bracket this year, minimizing the taxable cash portion might make sense even if the 50/50 option looks better from a pure investment return perspective. The merger timeline can sometimes shift too, so keep an eye on any updates from Broadcom or your broker about key dates and deadlines for making your election.

New York generally follows federal tax treatment for qualifying reorganizations, so the stock conversion portion should be tax-free at the state level too. However, NY has some specific rules around equity compensation that might affect your ESPP shares differently. I'd recommend double-checking NY Publication 36 (for residents) or Publication 425 (for non-residents) which cover stock transactions. If you have significant ESPP holdings with discounts, NY sometimes requires additional reporting even when the federal treatment is straightforward. Given the complexity you're describing with multiple equity types and the state tax considerations, this might be a good year to work with a tax professional rather than going the software route. The cost of professional help could easily be worth it to ensure everything is reported correctly and you're not missing any optimization opportunities. Also keep in mind that if you're close to higher tax brackets, you might want to consider timing other capital gains/losses this year to help offset the taxable portion of the merger payout.

I had my 401k provider take extra tax out when I got the distribution to account for the 10%. How can I get that to apply to that 10% penalty?

This thread has been incredibly helpful! I'm dealing with a similar situation - cashed out my 401k after losing my job last year. One thing I wanted to add that I learned the hard way: make sure you keep detailed records of WHY you took the early withdrawal. I initially thought I'd have to pay the full 10% penalty, but when I worked with a tax professional, we discovered that some of my withdrawal qualified for the "separation from service after age 55" exception (I was 56 when I left my job). Even though I didn't turn 59½ yet, this exception saved me from paying the penalty on the portion I withdrew after leaving my employer. It's worth checking ALL the exceptions on Form 5329 - there are more than you might think, and some have very specific rules about timing and circumstances. Don't just assume you have to pay the full penalty without exploring your options first!