Thank you for mentioning this! I just double-checked the 2021 W-2 and you're right - Box 1 does NOT include the repaid amount. It's separate from the W-2 entirely. My husband actually wrote them a check for the repayment since he had already left the company. That's why we need to handle this through the claim of right provision. Seems like Schedule 3, Line 13b is the consensus from everyone here.

That makes perfect sense then. Since the repayment was made directly and not through payroll deduction on the new job, you'll definitely need to use the claim of right provision. Schedule 3, Line 13b with "IRC 1341" notation is exactly right. Just be sure to keep documentation of the repayment (like a copy of the check and any correspondence) in case the IRS ever has questions. They don't require you to submit this documentation with your return, but you should keep it for your records.

There's no minimum threshold for claiming a credit under IRC 1341, but there is a threshold that determines which method you can use. If the repayment was $3,000 or less, you can only take it as an itemized deduction (which may not help if you take the standard deduction). For repayments over $3,000 (like the OP's situation), you can choose either the deduction or the credit approach, whichever benefits you more. So for your $800 repayment, unfortunately you would only be able to claim it as an itemized deduction on Schedule A, which wouldn't help if you're taking the standard deduction.

How much more can you actually contribute to a Solo 401k vs a regular employer 401k? I've heard mixed things and I'm trying to decide if it's worth the extra paperwork.

With a Solo 401k, you can contribute in two capacities - as both the employee and the employer. As an employee, you can contribute up to $22,500 (for 2023), just like with a regular 401k. But you can also make additional employer contributions of up to 25% of your compensation, with total contributions capped at $66,000. A regular employer 401k typically just allows the employee contribution plus whatever match your company provides, which is rarely anywhere near the maximum possible. The Solo 401k essentially lets you control both sides of the equation and maximize the total contribution.

Aren't there income limitations on Coverdell accounts though? I thought if you make above a certain amount you can't contribute.

Does that student loan exclusion apply to private student loans too or just federal ones? I have some private loans for medical school that I'm trying to settle.

The student loan forgiveness exclusion through 2025 actually applies to both federal AND private student loans, which surprised me too when I researched it. As long as the loans were specifically for post-secondary education expenses, they qualify. For your medical school loans specifically, you'll want to make sure you get proper documentation from your loan servicer about the forgiveness or settlement. The key thing is that they were used for qualified education expenses, not whether they're federal or private.

That's really interesting. So basically the way the debt forgiveness is structured and who does the forgiving can completely change the tax implications? Makes me wonder if more charity organizations should focus on debt forgiveness if they can do it in tax-favorable ways.

How does a 401k loan work during divorce? I'm worried about taking a loan and then having to split the remaining 401k balance with my spouse. Would the loan amount be considered in the division?

A 401k loan can definitely complicate things during divorce. The outstanding loan balance is generally still considered part of your total 401k assets for division purposes. So even though you've borrowed the money, it might still be counted in the overall value that needs to be divided. Another important consideration is what happens if you leave your job while having an outstanding 401k loan. Many plans require full repayment within 60-90 days of termination, or it's treated as a distribution subject to taxes and penalties. This can create additional risk during the already volatile financial period of divorce.

Be careful with this advice. You can only do one IRA rollover per 12-month period. If you do more than one, the additional distributions are taxable AND subject to the 10% penalty if you're under 59½. I learned this the hard way last year.

Can they expand the examination even if you only respond to what they asked for? I've heard horror stories about audits expanding to multiple years after they started looking at just one thing.

Yes, they can potentially expand the examination even if you only respond to what they asked for, but it's much less likely. They typically expand examinations when they find significant discrepancies that suggest similar issues might exist in other years, or if documents you provide reference other potentially problematic items. That said, correspondence examinations (the mail-in kind) rarely expand to full audits or multiple years unless they uncover major issues. The IRS has limited resources and generally focuses on the specific items they initially identified. If you maintain good records and legitimately claimed the deductions in question, even if your documentation isn't perfect, you'll usually be fine.

Thank you! This is super helpful. I'm actually missing receipts for about $1,200 worth of equipment purchases, but I definitely have the credit card statements. I wasn't sure if that would be enough on its own. For the donations, most were to my local animal shelter and a couple larger national organizations. I'll reach out to them ASAP for proper documentation. Do you know if the acknowledgment emails would work as a backup if I can't get the formal letters in time?

Credit card statements are a good start, but try to supplement them with additional evidence of what was purchased and its business purpose. If you have order confirmations, product manuals, photos of the equipment in use for your business, or even detailed notes you made about the purchases, include those as well. Acknowledgment emails can work as acceptable documentation if they contain all the required information: the organization's name, date of donation, amount donated, and a statement that no goods or services were provided in exchange (or their value if you did receive something). If your emails have all this information, they can serve as primary documentation. If they're missing some elements, include them as supporting evidence along with your request for formal letters.