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.

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.

I hadn't thought about the spousal IRA angle - that's a good point if one of us takes time off work. For the head of household vs. MFJ comparison, do you know roughly what income levels the breakeven point would be? We're trying to plan for several scenarios.

The breakeven point between HOH+Single vs. MFJ varies widely based on income distribution, deductions, and credits. Generally, if you both make similar high incomes (like your situation), staying unmarried often provides tax advantages. The MFJ advantages typically shine when incomes are very disparate. For 2024/2025, the standard deduction for MFJ is $29,200 while HOH is $21,900 and Single is $14,600. So HOH+Single combined is $36,500 - already higher than MFJ. But when you factor in the different tax brackets, EITC, child tax credits, etc., it gets complicated. The child tax credit phase-out starts at different income levels for different filing statuses. If one of you might take extended time off work with the baby, that's when marriage often becomes more advantageous tax-wise due to the income splitting effect and spousal IRA.

The capital loss thing is interesting, but only matters if both people have capital losses exceeding $3k individually, right? Otherwise it doesn't seem like an advantage.

Would this work for crypto? I've got some ETH that's gone up like crazy and I'm trying to figure out how to cash some out without giving half to Uncle Sam.

Yes, it can work for cryptocurrency. The key is that the trust sells it after you've donated it, so the trust itself doesn't pay capital gains tax on the appreciation. You'll need to find a trustee comfortable with handling crypto assets though, as some traditional trustees aren't familiar with the process. Keep in mind that you're ultimately giving a portion to charity - this isn't a strategy to avoid taxes completely while keeping all the money. But the tax benefits plus the income stream can make the math very favorable compared to just selling and paying capital gains tax directly.

I looked into something similar for my business. The Wyoming LLC part can work for privacy and some liability protection, but it doesn't magically change your tax situation. The IRS follows the money regardless of how many entities you put in between. And trying to loan yourself money through your own entities gets really tricky really fast.

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.