This has been an absolutely incredible thread! As a newcomer to this community, I was completely overwhelmed trying to figure out why my SPAXX earnings showed up on my 1099-DIV instead of my 1099-INT like I expected from a "money market" account. The explanation that finally made it all click was understanding that SPAXX is legally structured as a mutual fund that pools investor money to buy government securities, rather than being a direct bank deposit account. Even though we use it exactly like a high-yield savings account (deposit money, withdraw money, earn returns), the underlying legal framework makes it a mutual fund - and mutual funds distribute dividends to shareholders, not interest. For anyone else new to this situation: your SPAXX distributions need to be reported as ordinary dividends on line 3b of Form 1040, but they do NOT qualify for the special lower tax rate that applies to qualified dividends (line 3a). They get taxed at your regular income tax rate, same as your salary or wages. What really helped me understand this was thinking of SPAXX as an extremely conservative mutual fund that happens to invest in ultra-safe government Treasury securities instead of company stocks. The "dividends" are simply your share of the interest income that the fund earns on those government bonds and bills. I'm so grateful for this community's willingness to share knowledge and break down complex tax concepts into understandable explanations. This thread has been more helpful than hours of trying to decode IRS publications! Thanks to everyone who contributed their experiences and insights.

This thread has been incredibly enlightening! As a new community member who just opened my first investment account with SPAXX, I was completely baffled when I started researching how to handle this on my taxes. I kept thinking "why would a money market fund pay dividends instead of interest?" Reading through everyone's explanations, it finally makes sense that SPAXX is technically structured as a mutual fund that invests in government securities, even though it functions exactly like a savings account from our perspective. That legal structure is what determines the tax treatment - mutual funds pay dividends, banks pay interest. Just to confirm my understanding before I file: I should report my SPAXX distributions as ordinary dividends on line 3b of Form 1040, but NOT include them on line 3a since they don't qualify for the preferential qualified dividend tax rate. They'll be taxed at my regular income tax rate. I really appreciate how this community breaks down these complex concepts into practical guidance. The official IRS materials make this stuff seem way more intimidating than it needs to be. Having real people share their experiences and walk through the logic step-by-step is invaluable for newcomers like me who are just learning to navigate investment taxation. Thanks to everyone who contributed to making this such a comprehensive resource!

Just wanted to add another important consideration that hasn't been mentioned yet - the impact on your state taxes. While federal tax law generally treats gifts as non-taxable to the recipient, some states have their own gift and inheritance tax rules that might apply. For example, if you're a resident of a state like Pennsylvania or New Jersey, there could be additional reporting requirements or tax implications for large gifts, even from foreign sources. The thresholds and rules vary significantly by state, so it's worth checking with your state's tax authority or a local tax professional. Also, if you're planning to use the gift money for major purchases like real estate, be prepared for additional scrutiny from banks and mortgage lenders. Large foreign transfers can trigger anti-money laundering reviews, so having all that documentation we've been discussing (gift letters, transfer records, etc.) will be crucial for financial institutions as well, not just the IRS.

One thing I haven't seen mentioned yet is the potential impact on financial aid if you're a student or have children applying for college. Large gifts, even foreign ones that aren't taxable, can significantly affect Expected Family Contribution (EFC) calculations on the FAFSA. The Department of Education considers gifts received as untaxed income, which gets added back into the financial aid formula. So while that $20,000 gift from your Thai cousin won't create a tax liability, it could reduce financial aid eligibility by thousands of dollars if it's received during a base year for FAFSA calculations. If you have college-bound students in your family, you might want to consider the timing of when you receive large foreign gifts. The FAFSA looks back at income from two years prior (the "prior-prior year"), so receiving a large gift in the wrong year could have unintended consequences for financial aid eligibility. Just something to keep in mind when planning the timing of these transfers!

Does anyone know if HSA contributions work the same way? My employee wants to contribute to her HSA through payroll and I'm not sure if I need to pay employer taxes on that portion.

This is such a common source of confusion for small business owners! I went through the exact same thing when I first started my business. The key thing to remember is that retirement contributions like 401k and SIMPLE IRA are "pre-tax" for income tax purposes, but they're still considered wages for FICA (Social Security and Medicare) purposes. So in your example with the $65,000 salary and $25,000 retirement contribution, you'll pay employer FICA taxes on the full $65,000. The employee's income tax withholding will be calculated on $40,000, but that doesn't affect your employer tax obligations. One tip: make sure your payroll system is set up correctly to handle these different tax treatments. I learned this the hard way when I had to file amended returns because my initial setup was wrong. It's worth double-checking with your payroll provider that they're calculating employer taxes on the pre-deduction amounts for retirement contributions. Hope this helps clarify things while you're waiting for your accountant to return!

This thread has been incredibly informative! As someone who's also navigating high-income tax planning for the first time, I wanted to add one more consideration that might help others in similar situations. If you're using tax software to estimate your liability, make sure it's properly calculating the Additional Medicare Tax based on Medicare wages (Box 5 of your W-2) and not just using your AGI. I made this mistake initially when trying to project my 2024 taxes and was getting confused results. Also, for those mentioning bonus deferrals - check if your employer allows you to defer into a non-qualified deferred compensation plan rather than just delaying payment to the next calendar year. While this doesn't help with the immediate Medicare tax threshold, it can provide more flexibility for long-term tax planning if you expect to be in a lower tax bracket in future years. The collective wisdom in this thread about threshold management, equity compensation timing, and pre-tax benefit optimization is exactly the kind of practical guidance that's hard to find elsewhere. Thanks to everyone for sharing their real-world experiences!

This has been an absolutely fantastic thread - I've learned more about the Additional Medicare Tax in these comments than from hours of searching IRS publications! Just to summarize the key takeaways for anyone else in a similar situation: 1. The 0.9% Additional Medicare Tax is based on Medicare wages (Box 5 of W-2), not AGI or taxable income 2. Thresholds are $200k single/$250k married filing jointly/$125k married filing separately 3. The tax only applies to amounts OVER the threshold, not the full income 4. For married couples, filing jointly uses the combined income threshold 5. Employer withholding starts at $200k regardless of filing status, so you might get refunds if under joint threshold 6. Bonus deferral strategies can help manage threshold timing 7. Most pre-tax deductions (401k, health insurance) don't reduce Medicare wages, but a few like transportation benefits do 8. Equity compensation (RSUs, stock options) counts toward Medicare wages and can be harder to time 9. Setting aside money for potential additional tax is smart planning even if you think you'll stay under For those mentioning the various tax tools and services - it's great to see real user experiences rather than just theoretical advice. The complexity of these calculations really makes professional guidance or specialized tools worthwhile when you're close to these thresholds. Thanks to everyone who shared their experiences and strategies!

Yes, FreeTaxUSA absolutely saves your progress! I've been using it for the past two years and it's been really reliable about auto-saving everything as you work through each section. Just make sure you create an account and log in before you start entering information - that's the key step. Once you're logged in, it saves automatically after each page or section you complete. You can safely close your browser or log out whenever you need to, and when you come back everything will be exactly where you left it. I actually do the same thing you're planning every year - I start early and then add documents as they arrive throughout tax season. Last year I probably logged in and out at least 5-6 times over a couple weeks as I got various forms in the mail, and never had any issues with lost data. When you log back in, you'll see your return on the dashboard with a progress indicator showing how much you've completed. It makes it really easy to see what sections are done and what still needs your attention. Much better experience than trying to do everything in one marathon session! You're making a smart move switching from TurboTax - the functionality is essentially the same but you'll save a ton of money.

Yes, FreeTaxUSA definitely saves your progress! I've been using it for three years now and it's one of the most reliable features. As long as you create an account and stay logged in while entering your information, it automatically saves everything as you complete each section. I do exactly what you're planning every tax season - start early and then add documents as they come in. Last year I worked on my return over about two weeks, logging in and out probably 8-10 times as various 1099s and other forms arrived in the mail. Never lost a single piece of data. When you log back in, your return will show up on your main dashboard with a completion status (like "In Progress - 45% Complete") so you can easily see where you left off. The interface is really intuitive about showing which sections are finished and which ones still need attention. One small tip: make sure you're actually signed into your account before you start entering information. The system will let you work as a "guest" but then won't save anything. As long as you see your name in the top right corner of the screen, you're good to go! Don't stress about having to rush - take your time and add the missing documents when they arrive. You made a great choice switching from TurboTax!