I work in benefits administration for a large company. Just want to clarify something - there's a third option for handling FSA forfeitures that hasn't been mentioned yet. Employers can also use forfeited funds to provide additional FSA benefits to all participants equally during the next plan year. For example, our company takes the total forfeited amount, divides it equally among all FSA participants for the following year, and adds it to their elections as a "bonus" contribution. This approach has a benefit over direct redistribution because the additional FSA money isn't taxable when provided this way (as long as it's used for qualified expenses). However, it does mean you have to participate in the FSA again the following year to receive any benefit from the forfeitures.

Great question about FSA forfeitures! I went through this same confusion last year. From my experience, most employers do keep the forfeited funds rather than redistribute them - it's just administratively easier for them. However, if your company does redistribute, you should be able to find the specific method in your Summary Plan Description (SPD). Look for sections titled "Forfeitures," "Unused Funds," or "Plan Year End Procedures." If it's not clearly stated there, you can formally request this information from your plan administrator - they're legally required to provide it. One thing to keep in mind is that even if your company has a redistribution policy, the actual amount you might receive depends on how many people forfeit funds and how much your company spends on FSA administrative costs first. In years where fewer people forfeit money or admin costs are high, there might not be anything left to redistribute. The tax implications are straightforward though - any redistributed amount will definitely show up as additional taxable wages on your W-2, usually in the year after the plan year ends.

Make sure you're using good tax software for this! I messed up my 1099-R reporting last year by trying to do it manually and ended up with a CP2000 notice from the IRS. The penalty plus interest was painful.

I had a similar situation last year with multiple 1099-Rs and early withdrawal penalties. One thing that really helped me was creating a simple spreadsheet to track everything before entering it into my tax forms. I listed each 1099-R with the amounts from boxes 1, 2a, and 4, then calculated the 10% penalty on just the box 2a amounts. This made it much easier to double-check my work before filing. Also, don't forget that if you have state income tax, you'll need to check your state's rules too. Some states follow the federal early withdrawal penalty rules, while others have their own calculations or don't impose the penalty at all. My state actually had a lower penalty rate than the federal 10%, which was a pleasant surprise when I discovered it. The key is being methodical about it - the federal withholding from all your 1099-Rs gets combined with your W-2 withholding on line 25b, and the penalty calculation is straightforward once you focus on just the taxable amounts in box 2a.

I'm currently dealing with this exact same code 740 situation right now! My 2020 amended return refund got returned because I moved between filing and when they processed it. Reading through all these responses is super helpful - I had no idea there were so many different approaches to resolving this. I was planning to just call the IRS directly, but now I'm considering some of the other options mentioned here like the callback services or even checking if my tax software can help. One question I have that I don't think was fully addressed: Does anyone know if there are different procedures depending on whether it was an original return refund vs an amended return refund that got code 740? I'm wondering if amended returns might take longer to reissue or require different verification since they're processed differently in the first place. Also, for those who successfully got their refunds reissued, about how long did the whole process take from when you first contacted the IRS to when you actually received the money? Trying to set realistic expectations for myself! Thanks to everyone who shared their experiences - this thread is a goldmine of practical advice for this frustrating situation.

I went through this same nightmare with code 740 on my 2019 return! What a relief to find this thread and see I'm not alone. The whole situation is so frustrating - you do everything right, file your taxes, and then the government can't deliver your own money back to you because of an address change. I ended up calling the IRS directly after trying the online tools with no luck. The key is definitely calling early in the morning like others mentioned. I got through around 7:30 AM after about a 35-minute hold. The agent was actually pretty helpful once I got to a human - they verified my identity, updated my address, and told me the refund would be reissued as a check to my current address. The whole call took maybe 20 minutes once connected, and I received my reissued refund check about 2.5 weeks later. Make sure you have your Social Security card, a copy of that 2019 return, and some proof of your current address ready when you call. One thing I learned for the future: always set up direct deposit on your returns, especially amended ones that might take forever to process. Checks can get lost in the mail or returned if you move, but direct deposits go straight to your account regardless of where you live. Hope this helps and you get your money soon! It's definitely recoverable, just takes some patience dealing with the IRS phone system.

Has anyone considered using a 1031 exchange instead? If the property is eventually going to be an investment property, you might be able to defer those capital gains entirely!

One important consideration that hasn't been fully explored - if you're planning to live in this property as your primary residence initially, you should also think about the capital gains exclusion for primary residences down the road. If you live there for at least 2 of the next 5 years, you could potentially exclude up to $250k (single) or $500k (married) of capital gains when you eventually sell the property. This could be a powerful strategy: realize the stock gains now (ideally split across tax years as others suggested), use that money to buy the property, live there as your primary residence for the required period, then potentially sell tax-free later. The timing requirements are strict though - you need to own AND live in the home for at least 2 years out of a 5-year period. Also, since you mentioned considering this as an investment property eventually, be aware that if you convert it from personal residence to rental property, you'll need to deal with depreciation recapture when you sell, which is taxed at up to 25%. But the primary residence exclusion could still apply to the appreciation portion if you meet the use requirements.

One aspect that hasn't been mentioned yet is how 1099 work affects your ability to get loans or credit. Banks often view contractor income as less stable than W-2 employment, so you might need to provide additional documentation like tax returns from multiple years or profit/loss statements when applying for mortgages, car loans, etc. I discovered this when trying to refinance my mortgage after switching to contract work. Even though I was making more money as a contractor, the bank required two years of tax returns and treated my income more conservatively in their calculations. Something to keep in mind if you have any major purchases or refinancing planned. Also, regarding the $20/hr rate - if this is your first 1099 position, consider it as much a learning experience as a paycheck. You'll gain valuable skills in client management, invoicing, tax planning, and running a small business that could lead to higher-paying opportunities down the road. Sometimes taking a slightly lower equivalent rate initially is worth it for the experience and flexibility, as long as you can cover your basic expenses. Just make sure you're truly comfortable with that $14-16/hr W-2 equivalent that everyone's calculated, because that's realistically what you'll be taking home after all costs are considered.

This has been such a comprehensive discussion! As someone who's been wrestling with similar 1099 vs W-2 calculations, I wanted to add one more consideration: retirement planning flexibility. While everyone's focused on the immediate tax burden (rightfully so), one potential silver lining of 1099 work is the retirement savings options. Beyond the Solo 401k mentioned earlier, you can also open a SEP-IRA which allows you to contribute up to 25% of your net self-employment income (up to $66,000 in 2023). Even at $20/hr working full-time ($41,600 gross), after the self-employment tax deduction you might be able to contribute $8,000-10,000 annually to retirement accounts - potentially more than you could with many employer 401k plans that have limited matching. The tax deduction from these contributions can also help offset some of that higher tax burden everyone's calculated. It doesn't change the math dramatically, but it's worth factoring in when comparing long-term financial outcomes. That said, you still need to be able to afford living expenses first, so the consensus here about needing $22-25/hr to truly match a $15-16/hr W-2 position remains solid advice. Just wanted to highlight that the retirement planning flexibility can be a nice bonus if the base math works for your situation.