I'm dealing with this exact same situation right now! Got a W2 from my employer's disability provider with zeros in all wage boxes but about $5,200 in Box 12 Code J from when I was out on medical leave. After reading through everyone's responses here, I feel much more confident about just leaving this W2 off my return entirely. It sounds like multiple people have successfully done this without any issues from the IRS. The fact that Code J specifically indicates non-taxable benefits makes sense - why would I need to report income that isn't actually income? I was initially worried about "hiding" a W2 from the IRS, but now I understand they're not expecting me to report non-taxable amounts anyway. Going to go ahead and e-file without including it. Thanks everyone for the detailed explanations and real-world experiences - this community is so helpful for navigating these confusing tax situations!

I just went through this same situation a few months ago! Had a W2 from my company's short-term disability provider with $0 in all wage boxes but about $3,100 in Box 12 Code J. After doing some research and calling the IRS directly (which took forever to get through), they confirmed that Code J amounts are non-taxable sick pay benefits that don't need to be reported as income on your return. The agent told me that many people get confused by this because they think every W2 has to be included, but that's not the case when there's no taxable income involved. I ended up leaving it off my return completely and e-filed through FreeTaxUSA without any issues. Got my refund processed normally and never heard anything from the IRS about the "missing" W2. The key thing to remember is that your employer sends this W2 for documentation purposes - they're required to report any payments they made to you, even if they're non-taxable. But you're only required to report taxable income to the IRS, which in this case is zero. Don't let H&R Block's software limitations force you into mailing your return. Just file electronically without this W2 and keep the physical copy with your tax records for your own documentation.

I actually work in tax preparation and see this situation fairly regularly. One thing that hasn't been mentioned yet is that you should request a detailed account statement from the financial institution showing the contribution history and earnings breakdown before you do anything. This will help you calculate exactly how much of that $3,800 is original contributions (tax-free) versus earnings (subject to tax and penalty). Also, while everyone's mentioning the 10% penalty on earnings, don't forget that the earnings portion will also be subject to your regular income tax rate. So if you're in a 22% tax bracket, you're looking at 32% total tax on the earnings portion (22% income tax + 10% penalty). One strategy I've seen work well is to spread the tax impact across multiple years if the amount is significant. You're not required to withdraw the entire balance at once - you could take partial distributions over 2-3 years to potentially stay in a lower tax bracket each year, especially if you have other income fluctuations to consider. The beneficiary change option to a younger family member is definitely worth exploring if you have eligible relatives. Just make sure to handle this properly with the financial institution to avoid any inadvertent gift tax issues.

I'm dealing with a very similar situation right now! Found out about an old Coverdell ESA from when I was 16 - I'm 32 now and panicked when I first discovered it. After reading through all these responses, I feel much better about my options. One thing I wanted to add that helped me - when I finally got through to my financial institution, I asked them to calculate a "hypothetical distribution" breakdown before I actually pulled the trigger. They were able to show me exactly how much was original contributions versus earnings, which helped me plan better. In my case, most of the account value was actually original contributions since the account hadn't grown much over the years due to conservative investments. So even though I was expecting a huge tax hit, it turned out the actual taxable/penalty portion was much smaller than I feared. Also seconding the advice about taking some courses if you're on the fence about professional development anyway. I enrolled in a project management certification program at our local community college ($1,200) and used that to offset part of my distribution. Every little bit helps when you're trying to minimize that 10% penalty. The key is not to panic and just take action once you understand your options. The IRS isn't going to come after you for back penalties from previous years - you're only on the hook when you actually distribute the funds.

You're absolutely right to be frustrated! This pattern of constantly moving deadlines is unprofessional, regardless of how busy your accountant is. When you've done everything correctly on your end - organized QuickBooks records, provided all documentation, filed the extension - there's no excuse for such poor project management. The issue isn't that they're taking vacations (everyone deserves time off), but that they're not being honest about realistic timelines from the start. Saying May and delivering in September shows they either don't understand their own capacity or are overpromising to keep clients happy. For a sole proprietorship with organized books, this really shouldn't take months once they actually start working on it. I'd recommend having a direct conversation about the September 15th deadline being firm and non-negotiable. Also, absolutely ask for a fee reduction - you shouldn't pay full price for substandard service that's caused you months of unnecessary stress. Start looking for a new accountant now for next year. Interview them specifically about their workload management and ask for realistic timelines based on your business complexity. A good accountant will give you an honest assessment upfront rather than making promises they can't keep. You're not being unreasonable at all - you deserve professional service that respects your time and keeps commitments.

This is incredibly frustrating and you have every right to be upset! As a tax professional myself, I can tell you that constantly moving deadlines like this is simply poor business practice, regardless of how busy someone is. The reality is that a sole proprietorship with organized QuickBooks records should not take months to complete once an accountant actually sits down to work on it. We're talking about a relatively straightforward filing that an experienced professional should be able to handle efficiently. What's particularly concerning is the pattern of overpromising and underdelivering. Good tax professionals set realistic expectations from the start, even if the timeline isn't what the client wants to hear. The fact that they said May and are now at September suggests they either don't understand their own capacity or are taking on more clients than they can properly serve. You absolutely should request a fee adjustment given the multiple missed deadlines and stress this has caused. When service providers consistently fail to meet their own commitments, there should be consequences. For next year, I'd strongly recommend interviewing new accountants now while you have time to be selective. Ask them directly about their current client load, how they manage deadlines during busy periods, and what their realistic timeline would be for someone with your business structure. A quality professional will appreciate these questions and give you honest answers. The extension protects you legally until October 15th, but that doesn't excuse the unprofessional handling of your file. You deserve better service than this.

Can someone explain why they take so much longer to issue 1042S forms compared to 1099s? My American friends all have their tax documents already but I'm still waiting for my 1042S from two different banks. Is this normal?

Just to add another perspective - if you're feeling overwhelmed by all this, don't hesitate to reach out to your company's HR or payroll department if you work for a larger employer. Many companies that sponsor H1B visas have dealt with these exact situations before and may have resources or recommendations for tax professionals who specialize in non-resident issues. Also, keep in mind that even though you're getting a 1042S now, you should still report ALL your US-source income on your tax return, including any amounts that had tax withheld. The 1042S will show both the income earned and the tax already withheld, which you'll need to claim as a credit against any taxes owed. One more tip: if this is your first year receiving a 1042S, consider doing a mid-year tax projection once you file to see if you need to make estimated tax payments going forward, especially if you have other income sources that don't have withholding.

Just checked my own W-2 and realized my company might be making the same mistake! Box 12W only shows $1200 but I know my employer put in $1500 on top of that. Is this going to mess up my HSA contribution limits? I'm freaking out a bit now because I also contributed the max I could.

This is actually a really common issue that many employers get wrong! You're absolutely correct that Box 12W should include both your pre-tax contributions AND your employer's contributions to the HSA. The fact that your W-2 only shows $475 (just your contributions) while excluding the $900 in employer contributions is definitely an error. I'd recommend taking a two-pronged approach: First, gather all your HSA statements showing the deposits from both you and your employer, then present this documentation to your payroll department again. Sometimes it helps to reference IRS Publication 969 which clearly states that employer HSA contributions must be included in Box 12 with code W. If they still refuse to issue a corrected W-2, you can absolutely file your taxes accurately using the correct total of $1,375 on Form 8889. The key is making sure your tax return reflects the actual contributions made, regardless of the W-2 error. Just keep all your HSA documentation in case the IRS has questions about the discrepancy between your W-2 and your tax return. Don't let payroll's confidence shake you - you clearly understand HSA reporting better than they do in this case!