Thanks for this advice! Did you end up having to pay any penalties or just return the funds?

I caught mine and corrected it within the same tax year, so I just had to return the funds to my HSA account. No penalties or taxes since I fixed it before filing. Since some of your charges go back to last year, you might have a different situation. If you already filed taxes claiming those as qualified expenses, you'll likely need to file an amended return and potentially pay the 20% penalty on those specific amounts.

This is actually incorrect information. The type of provider (psychiatrist vs therapist) doesn't automatically make the expense qualified. What matters is whether the service is for medical care as defined by the IRS. Mental health treatment IS covered, but general wellness counseling is not considered "medical care" regardless of who provides it.

Is the attorney-client privilege only for criminal tax issues or does it apply to civil tax problems too? I'm dealing with some back taxes but nothing criminal.

Attorney-client privilege applies to both civil and criminal tax matters. Even in civil tax disputes, the privilege protects your communications with your attorney from being disclosed. This can be particularly important if you're discussing strategies, weaknesses in your position, or settlement options with your attorney. With a CPA, those conversations could potentially be discoverable by the IRS in certain situations.

Isn't that super expensive to have both? I'm trying to figure out which one I need without breaking the bank.

Wait, I thought the Tax Cuts and Jobs Act eliminated employee business expenses deductions? My tax preparer told me we can't deduct any of that stuff anymore, even with receipts.

You're absolutely right, and I should have been clearer. The Tax Cuts and Jobs Act suspended most unreimbursed employee business expense deductions for W-2 employees through 2025. Self-employed individuals, independent contractors, and business owners can still deduct these types of expenses. Also, some states still allow these deductions on state returns even though they're suspended at the federal level. Always best to check with a tax professional for your specific situation.

Your roommate is playing audit roulette. The IRS has a 3-year window to audit returns, and some returns are randomly selected regardless of what's claimed. Just because she hasn't been caught doesn't mean what she's doing is legal or that she won't eventually get caught.

That's an interesting idea I hadn't considered. Do both properties need to be investment/rental properties for a 1031 exchange to work? One of our homes has been purely a primary residence, while the other we rented out for about 18 months a few years back.

Yes, this is an important distinction - 1031 exchanges only work for investment or business properties, not primary residences. If the home you rented out for 18 months has since been your primary residence, you'd need to convert it back to a rental before attempting a 1031 exchange. For a mixed-use property (part rental, part primary residence), the exchange can get complicated. You might be able to do a partial 1031 exchange on the portion used for business/investment, but you'd need a tax professional to help structure this correctly. The primary residence exclusion is usually simpler for homes that have been your main home for 2+ years.

I used this when I had to relocate for a job after only living in my house for 14 months. You get a prorated portion of the exclusion based on how long you lived there divided by 24 months. So in my case, I got 14/24 of the $250k exclusion (about $146k). But you need legitimate unforeseen circumstances - not just wanting to sell two houses close together.

It's because the tax code itself is super complicated with different rules for different situations. W-2s are for regular employment, 1099s are for contract work, Schedule C is for self-employment, etc. The more complex your financial life gets, the more forms you need.

Oh shoot, I didn't even think about that! I'm still living at home while I work this job. Do I need to coordinate with my parents on this? How do I know if they're claiming me?

Yes, absolutely coordinate with your parents! Just ask them directly if they're planning to claim you as a dependent on their taxes for this year. If you're 18, living at home, and they're providing more than half of your support (housing, food, etc.), they likely can and should claim you. If they do claim you, you can still file your own return to get back any income tax withheld from your paychecks, but you'll need to check a box indicating someone else can claim you as a dependent. This affects some credits and deductions you might otherwise qualify for.