As someone who's dealt with both unfiled returns and PTO payouts, I'd strongly recommend getting those back tax filings sorted out ASAP before making any decisions about the PTO timing. The IRS has different rules and potential penalties for late filing that could affect your overall tax strategy. For the PTO itself, one thing to consider is your state's tax situation too - some states have different withholding rules for lump sum payments that could impact your decision. Also, if you're planning to use any of that $10k for major purchases or debt payoff, the timing of when you actually receive the cash (after withholding) vs. when you get it back as a refund could matter for your financial planning. Given the complexity with the health insurance subsidies, unfiled returns, and potential salary increase, this might be worth a consultation with a tax professional who can run the numbers for your specific situation rather than trying to figure it all out on your own.

I've been through something very similar with a large PTO payout and unfiled returns. Here's what I learned that might help: First, regarding the withholding vs actual tax liability - you're absolutely right that it evens out when you file. However, there's a cash flow consideration many people miss. If you take the lump sum now, you'll likely have 22% federal plus state withholding taken out immediately, but you won't see that money back until you file your return (which could be months away if you're still catching up on prior years). For the health insurance subsidies, this is actually the biggest factor in your decision. The ACA subsidy cliffs are steep - you could lose thousands in premium tax credits by going just a few hundred dollars over the income threshold. Since you mentioned expecting a salary increase next year, splitting the PTO between December and January might be worth it just to manage your annual income in each tax year. One thing I don't see mentioned yet - since you haven't filed for 3 years, you should know that the IRS stops processing refunds after 3 years. So if you had refunds coming for 2021 or earlier years, you may have lost them permanently. This makes it even more important to get caught up on those filings before worrying about optimizing this PTO payout. My suggestion: handle the unfiled returns first, then use those actual income figures to model out how the PTO timing affects your taxes and subsidies for both this year and next year.

Don't forget about currency conversion fees! When I transferred my savings from Europe, my bank charged me an outrageous amount. Check if your bank has a partner bank in the US - sometimes they offer better rates. Or use a service like Wise or OFX for better exchange rates. I ended up losing almost $800 in fees and bad exchange rates because I didn't look into this first!!

One thing I haven't seen mentioned yet is the timing of when you transfer the money. If you're planning to transfer a large amount, consider spreading it across multiple smaller transfers over a few months rather than one big lump sum. This can help avoid triggering automated bank reporting systems that might flag large international transfers. Also, make sure to keep records of the exchange rates on the day you transfer - you might need this information for tax purposes later. The IRS uses specific exchange rates for different dates, and having your own documentation can save headaches if there are any questions about the USD equivalent value of your foreign earnings. Finally, if you haven't already, consider opening your US bank account first and letting it "season" with smaller deposits before doing the big transfer. Some banks are more comfortable with large international transfers when they already have a relationship with you.

Has anyone else noticed that production companies are doing this W-2 to 1099 switch to save themselves money while screwing us workers? They're not paying their half of Social Security and Medicare anymore, and we're absorbing all that cost. This trend is destroying the industry.

The S-Corp option that Madison mentioned is definitely worth considering if you're making good money, but don't overlook the simpler steps first. Since you're new to 1099 work, I'd recommend starting with basic expense tracking and quarterly payments before jumping into more complex business structures. One thing I learned the hard way - keep separate bank accounts for business and personal expenses right away, even if you don't form an LLC yet. It makes tax time so much easier and the IRS loves clean separation of business finances. You can open a simple business checking account as a sole proprietor without forming any entity. Also, since you mentioned doing 15-18 gigs monthly, you might want to negotiate your rates up a bit if possible. Production companies switching to 1099 are saving 7.65% on payroll taxes (their half of Social Security/Medicare) plus unemployment insurance and workers comp. That's money that should ideally be reflected in higher contractor rates, though I know it's not always realistic to push for that immediately. The liability protection from an LLC is real though - one equipment damage claim or injury lawsuit could wipe out years of earnings. Even if you start simple with expense tracking and quarterly payments, definitely research the LLC formation process for your state.

Just a heads up - you might also need to amend your state tax return if you're in a state that offers tax benefits for 401k contributions. The excess amount wouldn't qualify for state tax benefits either. Also, make sure you coordinate with BOTH former employers. Sometimes when you have two jobs in one year, each employer doesn't know about the other's plan, so neither will automatically flag the excess.

One thing that hasn't been mentioned yet - make sure you understand the timing of when you need to take action. Since you haven't filed your 2023 return yet, you actually have until you file that return to get the excess contribution corrected without it being considered a "late" correction. However, the 6% excise tax on Form 5329 will still apply for 2023 since the excess remained in your account past December 31, 2023. The good news is that once you get the corrective distribution, you won't owe the 6% penalty for 2024 and beyond. Also, when working with your plan administrator, make sure they calculate the earnings (or losses) correctly using the "earnings calculation method" - they should track the performance of your specific contributions. If your account lost money during that period, the corrective distribution will actually be less than the $800 you over-contributed. Document everything carefully - keep all correspondence with your plan administrator and make sure you get the proper 1099-R when the distribution is processed. You'll need this for your tax filings.

This is such a comprehensive discussion! I've been lurking and reading through all the advice, and it's clear that using HSA funds for international dental work is definitely possible with proper documentation. I wanted to add one more angle that might be helpful for your friend - consider the timing of when he submits his HSA reimbursement claims. Based on what others have shared about longer processing times for international expenses, he might want to submit claims incrementally as he completes different phases of treatment rather than waiting to submit everything at once at the end. This approach has a few benefits: 1) It spreads out the cash flow impact if he's paying out-of-pocket initially, 2) It allows him to identify and fix any documentation issues early in the process, and 3) It reduces the risk of having a massive reimbursement request delayed or questioned all at once. Also, given all the great advice about documentation here, your friend should definitely bookmark this thread! The collective wisdom about currency conversion, receipt formatting, medical necessity letters, and HSA administrator requirements is gold. With $28K in potential savings on the line, taking the time to implement all these documentation best practices is absolutely worth the effort. Good luck to your friend - sounds like he's on track to save a substantial amount while getting quality dental care!

This has been an incredibly helpful thread! As someone who's been considering international dental work myself, I wanted to thank everyone for sharing such detailed, practical advice. One additional consideration I'd add - your friend should also check if his current dental insurance has any coordination of benefits with HSA usage. While dental insurance typically has much lower annual maximums than what he's looking at spending, if he has any remaining benefits for the year, he might be able to use those first and then use HSA funds for the remainder. This could potentially maximize his overall savings. Also, given all the great documentation advice here, I'd suggest your friend create a simple checklist before he travels: itemized receipts in English, medical necessity letters, exchange rate documentation, provider credentials, and contact info for follow-up questions. Having everything organized beforehand will make the reimbursement process much smoother. With $28K in savings potential, even spending a few extra days on preparation and documentation will pay for itself many times over. Best of luck to your friend - sounds like he's got a solid plan with all this advice!