Thanks so much for confirming the SECURE 2.0 Act timing. I was hoping there might be some retroactive relief, but that didn't seem likely. We've already taken the missed distribution now and I'm working on the waiver request letter. Do you know if I should mail the Form 5329 and letter separately from our regular tax return, or include it all together?

If you haven't filed your 2022 return yet, include the completed Form 5329 (with "RC WAIVER" written at the top) and your letter with your tax return. If you've already filed your 2022 return, then submit an amended return (Form 1040-X) with the Form 5329 and waiver letter attached. Make sure your letter clearly states that the missed RMD has now been distributed and reported as income for the year it was distributed (likely 2023). The IRS just wants to see that you've corrected the mistake and are taking responsibility. In my 30+ years working with tax issues, I've rarely seen them deny a first-time waiver request when the taxpayer has taken corrective action.

This is good advice! I work for a financial institution (can't say which one) and we help clients with missed RMDs all the time. We have template letters that have been successful with the IRS. Most custodians want to help because it's in everyone's best interest to resolve these issues smoothly.

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.

That's a smart idea! How did you verify they knew what they were doing though? I'd be nervous having another student handle my taxes. Did they make you sign any kind of waiver in case they made a mistake?

I checked that the student had completed advanced tax courses, including international taxation, and was in the master's accounting program. The professor supervision was key - I actually met with both of them for the initial consultation, and the professor reviewed the final forms before submission. No formal waiver was required, but we did have a simple email agreement outlining what they would do and the fee. The accounting program treated this as a practical training opportunity, so they were motivated to get it right. The student was actually incredibly thorough and found deductions I didn't know I qualified for, even with the non-resident limitations.

What software did you try using? I was thinking about trying TurboTax for my amendment but now I'm nervous...

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.

That's a great suggestion about the IRA! I never thought about that. If I'm gonna hit the contribution limit issue again next year, maybe I should reduce my 401k and put some in an IRA instead? Would a backdoor Roth make sense in this situation? I've heard about that but don't really understand how it works.

Exactly - if you know you'll likely face this issue again, you could contribute just enough to your 401(k) to stay under whatever threshold your plan administrator suggests, then put the rest in an IRA. Regarding backdoor Roth - that's mainly useful if your income exceeds the limits for direct Roth IRA contributions. You'd contribute to a traditional IRA (no deduction) and then convert it to Roth shortly after. It's a perfectly legal workaround for the income limitations, but has some nuances if you have existing traditional IRA balances (pro-rata rule). Would definitely be worth considering if you're over the Roth income limits.

Wait really? I thought it would count for the tax year when the original contribution was made. This is getting confusing...