Thanks for this info! I did take the distribution in February 2023, which was before my filing deadline for 2022 taxes. But I'm confused about reporting the earnings - my 1099R doesn't break out what portion was earnings vs. principal. Does this mean I need to amend my 2022 return now to report those earnings? Or can I handle everything on my 2023 return?

Since you took the distribution before your 2022 filing deadline, you should definitely avoid the 6% excise tax, which is good news. For the earnings portion, yes, technically those earnings should be reported on your 2022 tax return, which would mean filing an amendment if you've already filed for 2022. You'll need to contact Vanguard to get the breakdown of principal vs. earnings from that distribution. Ask specifically for the "net income attributable" or NIA related to the excess contribution amount. This might not be reflected correctly on your 1099-R if the distribution wasn't properly coded.

I've never heard of this self-certification procedure. Does it apply to 401k contribution corrections too or just IRAs? I overcontributed to both last year and am trying to sort through the mess.

That's actually a really thoughtful suggestion. We do give to our church and a couple local charities already, but hadn't thought about the tax angle. Would bunching donations in alternating years work better to get over the standard deduction threshold?

Yes, bunching donations is exactly what many financial planners recommend! For example, if you normally donate $5,000 per year, you could instead donate $10,000 every other year. This might push you over the standard deduction threshold in donation years (when you itemize) while taking the standard deduction in off years. Another option is a Donor Advised Fund, where you contribute a larger amount in one year for the tax deduction, but distribute the actual donations to charities over multiple years. This gives you the tax benefit immediately while allowing you to support charities gradually.

Yeah but the standard deduction for 2025 filing season is projected to be over $29,000 for married couples! Makes it even harder to benefit from mortgage interest unless you have a jumbo loan.

But what if their parents added them as an authorized user on their HSA? Couldn't they contribute that way since it's still part of the family limit?

Being an authorized user on someone else's HSA is different from having your own HSA eligibility. Authorized users can withdraw funds from someone else's HSA for qualified medical expenses, but they don't gain contribution rights. HSA contribution eligibility is tied to having your own HDHP coverage. Being covered as a dependent on someone else's family plan doesn't make you eligible to contribute to any HSA, either yours or theirs. The family contribution limit belongs to the HSA account owner (the parents in this case), not to the dependents covered under their plan.

You've got the testing period concept right but the year wrong. The "last-month rule" would only help for 2023 contributions if OP had their own HSA-eligible coverage by December 1, 2023 (which they didn't). Since they only got their own HDHP coverage in January 2024, the last-month rule might apply to their 2024 contributions (if they maintain coverage through Dec 31, 2024), but it can't retroactively create eligibility for 2023.

Does this apply even if it's a statutory conversion rather than a contribute-and-dissolve approach? I thought there might be different treatment for the holding period depending on how you structure the conversion.

Yes, it applies regardless of whether it's a statutory conversion or a contribute-and-dissolve approach. The IRS views the C-Corporation shares as newly issued at the time of conversion. Unfortunately, there's no way to tack on your LLC holding period to the QSBS 5-year requirement. This is actually one reason some founders convert to C-Corps earlier than necessary - they want to start that 5-year clock even before they need the VC funding. The only exception would be if you were already a corporation (like an S-Corp) converting to a C-Corp, where different rules might apply.

We actually did this! Created a holding company structure where potentially disqualifying assets were placed in a separate entity. Make sure you're working with someone who really understands the "active business" requirements though, because it's not just about separating assets but about their purpose and use. Our tax attorney specifically helped design a structure that would stand up to scrutiny.

That's really helpful advice! Would you recommend I get something in writing from a tax professional stating that my father doesn't need to file anymore? Or is my own documentation sufficient?

Your own documentation is usually sufficient. Just create a simple dated memo stating "As of [date], [parent's name] no longer files tax returns as their only income is Social Security benefits, which falls below the IRS filing threshold." Include any reference to IRS publications that support this (Publication 915 covers Social Security taxation). A tax professional's statement isn't necessary but can provide extra reassurance if you're concerned. Some tax preparers will provide a simple letter confirming non-filing status at little or no cost if you've used their services before. Just having something in your parent's financial records explaining the change helps if questions arise during future care transitions or estate matters.

Not filing taxes won't negatively impact a Medicaid application. In fact, it's completely normal for Medicaid applicants who only receive Social Security to not file tax returns. Medicaid eligibility is based on current income and assets, not on tax filing status. They'll still want to see proof of all income sources (including the SSA benefit statement), but they won't expect or require tax returns if there's no filing requirement.