One thing nobody has mentioned yet - have you considered just keeping the money in the Roth IRA and paying the excise tax? If your investments have grown significantly (especially during the 2020-2023 bull market), it might be worth just paying the 6% penalty. The reason is that Roth IRA growth is tax-free forever if you wait until retirement age. So if you're young and the account has decades to grow, you might actually come out ahead mathematically by paying the penalty and keeping the tax-free growth vehicle. You'd still need to file Form 5329 for each year and pay the penalties, but you wouldn't withdraw the funds. Just something to consider alongside the other options.

Have you considered speaking to your brokerage firm? I had a similar issue with excess contributions and my brokerage (Fidelity) had a specific department that handled excess contribution removals. They calculated the attributable earnings for me and could process the removal in a way that was properly coded for the IRS. Also, don't forget that if you're using the money for qualified education expenses as you mentioned, you might qualify for an exception to the 10% early withdrawal penalty on any earnings (though you'd still owe income tax on those earnings). This is separate from the 6% excise tax issue, but could help reduce the overall financial impact.

I used to work for a federal agency that issued cooperative agreements and JVAs. What's probably happening is that the agency is classifying your payment as a "cooperative agreement payment" rather than "contractor compensation" in their system. Federal accounting is weird like that. But here's the important part - this is THEIR classification for THEIR accounting purposes. For YOU, it's still income you received for services rendered, which means it's reportable on your Schedule C. Don't let their internal accounting categories affect how you report your income.

Has anyone else noticed that when working with federal agencies, they often have totally different terminology and procedures than private sector clients? I did a project with USDA last year and they kept referring to my payments as "cost share reimbursements" even though I was clearly a contractor. Tax time was a nightmare!

I've used TurboTax for about 15 years now, including through marriage, home purchase, kids, etc. Here's my take: For most situations, TurboTax is actually pretty accurate and reliable. Their questionnaire-based approach catches most common deductions and credits. That said, there are a few things to watch for: 1) The software pushes their paid add-ons HARD (audit protection, MAX benefits, etc). Most people don't need these. 2) Always double-check your entries, especially withholding amounts from W-2s (Box 2 federal withholding is commonly mistyped). 3) If your refund seems suspiciously large, go through the "deductions & credits" section again to make sure you didn't claim something incorrectly. 4) For first-time homebuyers with mortgage interest and property taxes, a jump in refund amount IS normal if you now itemize instead of taking the standard deduction.

Has anyone compared TurboTax to other tax software? This is my first year with similar circumstances (marriage + mortgage) and I'm trying to decide between TurboTax, H&R Block, and FreeTaxUSA.

TurboTax pulls this crap EVERY YEAR! They're trying to make it seem like everyone needs to file quarterly estimated taxes. My theory is they want to scare people into thinking taxes are more complicated than they are so you'll keep using their service. I switched to FreeTaxUSA this year and it asked clearly if I wanted to generate estimated payment vouchers instead of just doing it automatically. Saved like $80 too. TurboTax is getting worse every year, I swear.

Just my 2 cents, but even tho u don't technically need 2 file an amended return, u might want to check if TurboTax charged u extra for setting up those vouchers. I got hit with a $35 fee for "advanced tax planning features" when this happened to me, but had no idea until I looked at my receipt later. They bury these charges in the final bill sometimes.

Bit of a different perspective - I'm an accountant who works with a lot of gig workers. For just $400, honestly, you're going to pay more for tax software or professional help than you might owe in taxes. Keep good records, track income and expenses, but don't stress too much until you're making more substantial money.

Just a heads up - if your clients are in the US and you earn over $600 from any single one, they're supposed to issue you a 1099-NEC form. That gets reported to the IRS, so make sure your tax filing matches those forms!