This is super helpful, thank you! How long did it take them to respond to your abatement request? And did you have to provide any specific evidence beyond just pointing out the timeline?

It took about 6 weeks to get a response, which was actually faster than I expected. I didn't need special evidence beyond clearly outlining the timeline with specific dates. One tip - I made sure to include all the reference numbers from the CP2000 notice at the top of my letter and made it very clear I wasn't disputing the actual adjustment, just the interest. I think that helped it get processed faster since they knew I wasn't challenging the underlying tax assessment. I also kept it to one page and very factual - no emotional language about how unfair it was. Just dates, facts, and the specific tax code.

I tried the Taxpayer Advocate last year for a similar issue but they told me they couldn't help because it wasn't an "economic hardship" situation. Seems like they're really only equipped to help if you're facing immediate financial difficulty, not just regular interest disputes. Worth a shot I guess but they're also super backed up these days.

Good point about the hardship requirement. I think my situation qualified because I was facing a lien at the time. For regular interest issues, probably better to go with the interest abatement request directly to the IRS like others mentioned. The Taxpayer Advocate is really more for when you're truly stuck in the system or facing serious consequences.

Does the timing issue apply differently for Roth vs Traditional IRAs? I have a similar situation with both types of accounts and I'm confused about which deadlines apply to each.

The timing rules are actually the same for both Roth and Traditional IRAs. For both types, you need to withdraw excess contributions (and any earnings on those contributions) by your tax filing deadline including extensions (typically October 15th) to avoid the 6% excise tax penalty. The main difference is in how the earnings are treated. For Traditional IRAs, the earnings are generally taxable in the year you make the withdrawal. For Roth IRAs, the earnings are also taxable if you withdraw them, but they may additionally be subject to the 10% early withdrawal penalty if you're under 59½ and don't qualify for an exception.

Yes, you'll likely need Form 5329. I had a similar situation and had to use it to report the excess contribution and show that I had taken corrective action by removing it, even though it was incorrectly coded as a normal distribution. This helps avoid the 6% excise tax on excess contributions.

They just remove the money and any associated earnings - they don't close your account. I had this exact situation with Vanguard last year, and my account stayed open with a $0 balance after the removal.

Thanks for this explanation! I didn't roll it over, I cashed it out completely (I know, probably not the smartest financial move, but I needed the money for some home repairs). So it sounds like I should definitely be reporting this on my 2024 taxes regardless of what TurboTax is saying? I'm wondering if I somehow answered one of their questions wrong during the interview process.

Yes, you absolutely need to report it on your 2024 taxes (filed in 2025). Since you cashed it out completely and didn't roll it over, it's a taxable distribution in the year it was distributed. I suspect you might have accidentally indicated it was a rollover when answering TurboTax's questions, or there might be some other confusion in how you're navigating the software. I'd recommend starting over with entering that 1099-R and carefully reading each question. If TurboTax still gives you the same guidance, you should contact their support because that would definitely be incorrect advice for your situation.

This is a really good point! I've made this exact mistake before. The tax software naming conventions can be super confusing because they're labeled with the tax year, not the year you're using them in.

The problem with checking that box is it often withholds too much if your incomes aren't exactly equal. I found it better to use the irs withholding calculator online and follow its recommendations instead of the worksheet.

That's a fair point. The checkbox method is definitely a rough estimate. The calculator is more precise, especially if one spouse makes significantly more than the other. I've found the worksheet reasonable when our incomes are within about 20% of each other, but anything beyond that and the calculator is definitely the way to go.

This is good advice. I target about $500 refund as a buffer. Also remember that if you owe more than $1000 at tax time AND didn't have at least 90% of your tax liability withheld throughout the year (or 100% of last year's tax), you could face underpayment penalties.