Do you know if there's any regulation about how much extra they can charge for credit? My local station is charging almost a dollar more per gallon for credit vs cash which seems WAY more than the actual processing fee would be.

The regulations vary by state, but generally there's no strict limit on the price difference. However, in most states, they do need to clearly post both prices. Some states like California have regulations requiring that credit card surcharges can't exceed the actual cost to the merchant, but enforcement is spotty. The large difference you're seeing (nearly a dollar) is definitely more than just covering the processing fee. It's likely they're using the cash discount to encourage a payment method that has other benefits for them - faster settlement, no chargebacks, and possibly some unreported cash transactions. It's a way to improve their overall margins in a business with typically very thin profit margins.

Is it true that gas stations make almost no money on the actual gas and make all their profit on the convenience store stuff? I've heard that's why they try so hard to get people inside the store.

Oh that's really good to know! I actually do have an old 401k that I rolled into a Traditional IRA last year. So if I did conversion instead of recharacterization, I'd have to convert some of that old 401k money too and pay taxes on it?

Yes, that's exactly the issue. With the pro-rata rule, you can't cherry-pick which dollars to convert. If you have $9,500 in non-deductible contributions and, say, $40,000 in pre-tax money from your old 401k rollover (all in Traditional IRAs), then any conversion would be proportionally taxable. If you converted $9,500, about 19% would be considered non-taxable (your non-deductible portion) and 81% would be taxable. The IRS looks at all your Traditional IRAs as one big bucket for this calculation. Recharacterization bypasses this completely since it's treated as if you never contributed to the Traditional IRA in the first place.

I did a recharacterization with Fidelity last year. Had to call - couldn't find any way to do it online. The phone rep was actually really helpful and processed it while I was on the call. Had to confirm I understood the tax implications but it was pretty straightforward once I got through to someone.

Did you have to file any special forms when you got them to stop requiring repayment? I'm worried if I just stop paying the $500 installments it'll trigger some kind of automatic collection process. Did they give you any pushback or was it fairly straightforward once you showed them the correct closing date?

I had to file a Form 843 (Claim for Refund and Request for Abatement) along with a detailed letter explaining the situation. I attached copies of my closing documents clearly showing the 2009 date, plus copies of my original tax returns where I made the mistake. The IRS did initially send some automated notices when I stopped making the payments. That's why it's important to be proactive rather than just stopping. They eventually processed my claim and sent a letter confirming I was no longer responsible for the remaining payments. It took about 5 months total from submission to resolution.

That's why I always tell people to triple-check dates on major tax credits! The government loves to create these weird cutoff periods that can cost you thousands. I had a client who missed the solar tax credit by ONE DAY because of installation timing. Brutal.

Do you have a template for that written plan? Or did you have your accountant create it? I'm trying to figure out if this is something we can do ourselves or if we need professional help with it.

I created it myself based on some research, then had my accountant review it. It doesn't need to be super complex - mine is about 2 pages. It basically states that the corporation will reimburse employees (including shareholder-employees) for health insurance premiums up to a certain amount annually. Key elements to include: effective date, eligible employees, what expenses are covered, maximum reimbursement amounts, how/when reimbursements will be processed, and documentation requirements (employees need to submit proof of premium payments). You should also state that it's intended to comply with relevant tax regulations.

I did this with my S-corp and it works well, but make sure you understand the income reporting. The marketplace uses MAGI (modified adjusted gross income) to determine subsidies, which includes your W-2 wages plus business profits passed through to your personal return.

Thank you so much for sharing your experience. That makes me feel a lot better. Did you use a tax preparer or did you do it yourself? And about how much were the penalties as a percentage of what you owed?

I used a local tax preparer who advertised help with unfiled returns. Cost me about $175 per year to prepare, but it was worth every penny for the peace of mind. The penalties ended up being roughly 25% of what I owed, plus interest that had accumulated. So for example, one year I owed about $2,200 in actual taxes, and the penalties/interest added about $800. Not fun to pay, but definitely not the financial apocalypse I had built up in my head. The payment plan let me spread it out over 36 months too.

Yes! This tripped me up too. If you're using software like TurboTax or H&R Block, make sure you buy the specific year versions for each past year. Current year software won't work for prior years.