Thank you! This sounds very similar to what might have happened to me. Did your husband end up owing taxes on the distribution? And did he have any luck getting the money back after all that time?

Yes, he did owe some taxes because they processed it as a distribution rather than a direct rollover, which was super annoying. We had to pay about $1,600 in taxes on it. We probably could have fought it, but the amount wasn't worth hiring a tax pro for. He was able to claim the remaining money though! We contacted the company, verified his identity, and they sent a check for the remaining amount (after the withholding they'd already taken out). Took about 3 weeks to get the check. If your situation is similar, definitely call them ASAP to claim your money before it potentially gets sent to the state as unclaimed property.

That unclaimed benefits site is legit. I found an old pension I didn't even know I had from a summer job in college. Only about $3,200 but hey free money!

Is Form 8948 something that can be e-filed or do you have to mail everything in? I'm in a similar situation but I really don't want to paper file if I can avoid it.

There's actually no Form 8948 specifically for reasonable cause - I apologize for the confusion! What you need to do is write a penalty abatement letter explaining your reasonable cause (your illness) and attach any supporting documentation. If you're e-filing, you'd need to mail this letter and documentation separately after filing. Reference your SSN and tax year on all documents. While you can e-file your return, the reasonable cause request typically needs to be mailed separately. Some tax software allows you to include a brief statement with your e-filed return, but a formal request with documentation will need to be sent by mail for proper consideration.

Definitely this! You can make an estimated payment online using IRS Direct Pay. It's super easy and takes like 5 minutes. Way better than owing a giant lump sum when you file.

Does this same process work for ESPP shares? I received a similar notice but for my employee stock purchase plan discounts.

For ESPP shares it's similar but with important differences. The discount you receive when purchasing ESPP shares isn't reported on your W-2 (unlike RSUs). Instead, you report the discount as ordinary income when you sell the shares. If you held the shares long enough for a qualifying disposition (generally 2 years from offering date and 1 year from purchase), you report the discount as ordinary income and any additional gain as capital gain. For disqualifying dispositions (selling earlier), you report the discount as ordinary income and the rest as capital gain. Make sure your Form 8949 correctly identifies the basis adjustment for the discount portion. Include documentation showing your purchase price, the fair market value at purchase, and your sale details.

Did you need to use a tax professional for this or were you able to handle it yourself? I just got a CP3219A for $9,200 and I'm trying to figure out if I can DIY this response or if I need to hire someone.

OMG I didn't even think about that. Yes, he definitely gets a subsidy that makes the insurance affordable. How do we avoid a big surprise bill? Did you find a way to fix this issue going forward?

To avoid the surprise bill, you need to update your Marketplace application ASAP to reflect your actual tax filing intentions. Log into healthcare.gov (or your state marketplace) and report a "life change" to update who will be claiming the kids as tax dependents. For fixing it going forward, we set a calendar reminder for every December to review our tax and insurance situation before the new year. We also printed out IRS Publication 974 which explains the Premium Tax Credit rules and read through the sections on shared policies. It's complicated but worth understanding! The good news is that if you're proactive about informing the Marketplace, you can usually avoid any negative impact on either the tax or insurance side.

Do you know if there's any way to offset or reduce state capital gains taxes? Do strategies like 401k contributions work for state taxes too?

Generally, 401k contributions will reduce your state taxable income as well as federal, so that strategy works for both. In most states, their tax system is linked to the federal system, so deductions that work federally often work at the state level too. Some states have unique quirks though. A few states offer special capital gains exclusions for in-state investments or specific industries. And nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) don't have income tax at all, so capital gains are only taxed federally if you live there.

Tax-loss harvesting can be a great strategy. Basically, you can use investment losses to offset your capital gains dollar-for-dollar. If your losses exceed your gains, you can even use up to $3,000 of those losses to offset ordinary income, with any remaining losses carrying forward to future years. Just be careful about the wash-sale rule - if you sell an investment at a loss and buy the same or a "substantially identical" investment within 30 days before or after the sale, you can't claim the loss for tax purposes.