Just to complicate things even more - if you're using a Solo 401k plan, the total contribution calculation is slightly different than a regular 401k. For 2023, you can contribute up to $66,000 total between employee and employer contributions (or $73,500 if you're over 50). The employee part is straightforward ($22,500), but the employer contribution limit is actually 25% of compensation AFTER subtracting the employee contribution from your total compensation. Most accountants mess this up!

I went through this exact same confusion with my S-Corp last year! The key thing to remember is that as an S-Corp owner, you're essentially wearing two hats - you're both an employee (receiving W-2 wages) AND the employer. Your financial advisor is correct - the employer contribution is limited to 25% of your W-2 compensation ($105k), which equals $26,250. This is completely separate from any distributions you take from the company. The distributions don't count as "earned income" for retirement plan purposes. What might be confusing your accountant is that for other business structures (like sole proprietorships or partnerships), the calculation IS based on net earnings from self-employment. But since you've elected S-Corp status and are paying yourself a reasonable salary with proper payroll taxes, you follow the W-2 compensation rules. One thing to double-check: make sure your $105k salary meets the IRS "reasonable compensation" test for your industry and role. If the IRS ever audits and determines your salary should be higher, it could affect your contribution calculations retroactively.

Does anyone else think the tax reporting for HSAs is needlessly complicated? Like why do we need separate forms when the info is already on W-2s? The whole system is ridiculous.

I've been dealing with HSA tax reporting for years and wanted to add a few points that might help others avoid common mistakes: 1. **Keep detailed records of all HSA distributions** - even if they're for qualified medical expenses. The IRS doesn't automatically know what you spent the money on, so you need documentation to prove qualified expenses if audited. 2. **Watch out for the contribution timing** - contributions made between January 1 and the tax filing deadline can count toward the previous tax year if you specify that when making the contribution. This can affect which year's Form 8889 you report them on. 3. **Don't forget about HSA earnings** - if your HSA account earned interest or investment gains, those aren't reported as income as long as you don't withdraw them for non-qualified expenses. For those worried about past unfiled 8889 forms, I'd recommend consulting with a tax professional to evaluate your specific situation. In many cases where all contributions were through payroll and distributions were for qualified expenses, the impact on your actual tax liability is minimal, but it's still worth getting proper advice tailored to your circumstances.

Anyone know if you need to fill out a separate Form 8889 for each HSA, or can you combine them? I'm in a similar situation with multiple HSAs and honestly the form instructions are like reading hieroglyphics to me.

I went through this exact same situation last year with dual employer HSA contributions! The stress is real, but you're handling it correctly by getting the excess distribution sorted first. One thing that tripped me up initially - make sure when you report on Form 8889, you enter your contributions exactly as they appear on your W-2s and HSA statements, even if they exceed the limit. The form will calculate the excess for you in Part III. Don't try to "correct" the numbers yourself by only reporting the allowed amount. Also, double-check that your HSA provider sends you a 1099-SA for the excess distribution with the right reason code (should be code 2 for excess contributions). If they mess this up, it can cause headaches later with the IRS. You've got this! The worst part is behind you once you get that excess removed before the filing deadline.

For anyone else filing 1040NR and paying online, make sure you complete your payment by 8pm Eastern Time on the due date for it to count as paid on that day! I found this out the hard way last year when I submitted at 11pm Pacific (which was 2am Eastern) and got hit with a late payment penalty even though it was still the due date in my time zone. Super annoying!

Just wanted to add one more important tip for 1040NR filers making payments online - if you're using Direct Pay or any electronic payment method, make sure to keep a screenshot or printout of your confirmation page immediately after completing the payment. The IRS systems can sometimes have delays in processing non-resident payments, and having that confirmation number and timestamp has saved me twice when there were questions about whether my payment was made on time. Also, if you're paying a large amount (over $10,000), be prepared for potential additional verification steps. The payment system may require you to verify your identity through additional security questions or may put a temporary hold on the payment for review. This is normal for larger payments from non-residents, but it's good to know ahead of time so you're not surprised if it happens.

Has anyone found a good resource for figuring out which tax forms are absolutely necessary vs. which ones are just "recommended"? I'm in a similar situation with only payroll HSA contributions, and my tax software (FreeTaxUSA) didn't automatically generate an 8889 even though it knows about my HSA contributions from my W-2.

I can confirm that Form 8889 is absolutely required even with only payroll contributions. I made this mistake myself a few years ago and had to file an amended return after the IRS sent me a notice asking about the missing form. The key thing to understand is that your W-2 Box 12 (code W) only shows the contribution amount, but Form 8889 serves as your formal declaration to the IRS that you were eligible to make HSA contributions and that you didn't exceed the annual limits. For 2024, the limit is $4,300 for individual coverage or $8,550 for family coverage (plus $1,000 catch-up if you're 55+). As a non-resident filing 1040-NR, this is even more critical because the IRS will want complete documentation of all tax-advantaged accounts. The good news is that if you only had payroll contributions and no distributions, you'll only need to complete Part I of Form 8889, which is pretty straightforward. Don't rely solely on tax software for this - they sometimes miss required forms. The IRS instructions are clear that ANY HSA activity during the year requires Form 8889, and contributions definitely count as activity.