Thanks for this tip! So if I understand correctly, I could still potentially avoid the penalty even now? My broker is Vanguard - would I just call them and ask for a "return of excess contribution" specifically for my 2020 contribution? Do you know if there's a time limit for doing this correction?

Yes, you would call Vanguard and specifically request a "return of excess contribution" for tax year 2020. Be very clear about which tax year you're correcting. There is a time limit - ideally you want to do this before the tax filing deadline for that year (including extensions). Since we're well past the 2020 deadline, you'll still owe the 6% penalty for 2020, but removing the excess now stops you from owing the penalty for subsequent years too. The excess contribution continues to be penalized 6% every year until you either remove it or "absorb" it by using up part of a future year's contribution limit.

I second FreeTaxUSA! TurboTax really struggles with Form 5329 and excess contributions. My tax preparer actually recommended I switch to FreeTaxUSA specifically for handling my IRA issues.

Thanks for bringing up special allocations - I wasn't familiar with that concept or the "substantial economic effect" requirement. What exactly counts as having "economic effect beyond tax savings"? Would things like my wife handling all the management responsibilities as GP while I provide most of the funding as LP qualify? And yes, we've considered an S-Corp too, but I was concerned about the "reasonable salary" requirement. Our business is projected to make around $300k/year, and I wasn't sure what would be considered "reasonable" for our industry (real estate investments).

Your wife handling all management responsibilities while you provide funding could potentially create economic effect beyond tax savings, as it reflects the different roles you're playing in the business. Document her actual time spent, decisions made, and management activities to substantiate her role. The key is having her GP role reflect genuine business operations, not just a paper arrangement. For S-Corps in real estate investing with $300k annual income, reasonable salary benchmarks typically range from $60k-$120k depending on location, portfolio size, and actual services performed. The IRS looks at comparable compensation for similar roles in your market. I recommend researching salary surveys for real estate investment managers in your area to establish a defensible figure.

The IRS calculator is pretty basic and doesn't account for complex allocations. I'd recommend the tools at business.gov instead - they're more comprehensive. And yes, states definitely have different rules! California is particularly strict with partnership structures and charges an $800 minimum annual tax regardless of profitability. New York and Delaware have more favorable treatments. Check your state's secretary of state website for specific requirements.

Thanks for the business.gov suggestion! I'll check that out instead. And I had no idea California charges $800 annually regardless of profit - that's good to know since we might expand there eventually. I'll definitely look up my state's requirements on the secretary of state website.

I checked my E*TRADE account and couldn't find anything like that. Is this something I need to specifically request from them or from my employer?

E*TRADE should have something similar, but it might be called something different like "Cost Basis Statement" or "Equity Awards Tax Information." Try looking in the Tax Documents section specifically. If you can't find it there, you might need to contact your company's stock admin team rather than E*TRADE directly. Sometimes the employer has to authorize the broker to provide that supplemental information. For anyone who can't find this document, an alternative is to look at your last December paystub or your W-2, find the total RSU income reported there, and match it to your vesting statements to calculate the proper basis yourself.

Did you have to pay penalties when you filed the amended return? I'm in the same boat and just realized I messed up last year's taxes.

22 How do you estimate what you owe if you don't have time to do the calculations? That's the part that confuses me about extensions.

7 You make an educated guess based on last year's return and your current situation. The simplest method is to look at what you paid last year, then adjust up or down based on whether you earned more or less this year. You want to pay enough to avoid underpayment penalties. Another approach is to do a rough calculation using your 1099s and W-2s, estimating major deductions but not worrying about getting everything perfect. It's better to slightly overpay and get a refund later than underpay and face penalties. Just make sure to submit the payment with your extension form by April 18th.

19 Did they actually save you money compared to TurboTax though? I've heard mixed things about H&R Block for anything complicated.

I actually am taking some community college classes! Would that qualify me for education credits even though my income is low? Also, what's the income range for that Earned Income Tax Credit thing you mentioned? This makes me think I definitely should file even though the tax place told me not to.

Yes, education expenses could qualify you for the American Opportunity Credit or the Lifetime Learning Credit! The American Opportunity Credit is partially refundable, meaning you could get up to $1,000 back even if you don't owe taxes. You need Form 1098-T from your school which shows your tuition payments. For the Earned Income Tax Credit, a single person with no qualifying children needs to earn less than about $17,640 in 2025, and be at least 25 years old (with some exceptions). Since you're 19, you might not qualify for EITC yet unless you meet one of the exceptions, but the education credits are definitely worth looking into. This is exactly why general advice like "don't bother filing" can sometimes cause people to miss out on money they deserve!

Oh that makes sense why they were confused when I mentioned the I-9! I just knew it was some form with a letter and number lol. Is there a way I can check if my W-4 is filled out correctly before submitting a new one? I don't wanna mess it up again.