1 Thanks for this suggestion! I just checked my paystubs and you're absolutely right - my first employer continued to withhold for Colorado even after I moved to Washington. No wonder I owe so much! Is there any way to fix this after the fact or am I just stuck paying what I owe now?

9 Unfortunately, you generally can't fix it after the tax year has ended - you'll need to pay what you owe now. But you should immediately contact your payroll department to correct it for this year so you don't have the same problem next tax season. For this year's taxes, make sure you're filing as a part-year resident for Colorado and indicating the correct dates you lived in each state. That will at least ensure you're only paying Colorado tax on income earned while you were actually living there.

18 Colorado and Washington don't have a reciprocity agreement, but that's actually not relevant in this case anyway. Reciprocity agreements typically apply to people who live in one state but work in another. Since Washington has no income tax, there's no double taxation issue here. The problem is more about proper withholding and filing correctly as a part-year resident. The OP needs to file a part-year return for Colorado, reporting income earned while a resident there (plus any Colorado-sourced income after moving).

16 That makes sense, thanks! I was confusing reciprocity with something else. Sounds like moving to a no-income-tax state should be beneficial in the long run, even if it causes some confusion in the transition year.

That's an interesting option I hadn't thought about. Would I still need to file anything special for 2022 and 2023 to show that I'm now applying that excess to 2024? Or does just paying the penalty take care of it?

You would need to file Form 5329 for tax years 2022 and 2023 to pay the 6% excise tax for each of those years. Then when you do your 2024 taxes, you would indicate that you're applying prior year excess contributions to your 2024 contribution limit. The important thing is that you don't make a full contribution for 2024 if you're applying the excess from 2022. For example, if the 2024 limit is $7,000 and you're applying $4,630 from 2022, you would only be able to contribute an additional $2,370 for 2024. It's a good option if you're short on cash but still want to maintain your retirement savings.

The Roth income limits also increased for 2024. For single filers, the phaseout range is now $146,000-$161,000. So if OP's income is similar to 2022 (around $140k), they might be fully eligible this year without any phaseout.

That's a good point. With the new higher income phaseout ranges, OP might not run into the same problem for 2024. But they still need to address that 2022 excess contribution issue regardless of their current situation. Leaving it unresolved means continuing to pay that 6% penalty year after year.

Wait really? I've been driving for UberEats for 6 months and only counting miles when I have food in the car. So I can count ALL the miles when I'm logged into the app and available for deliveries?

Yes! Any miles driven while you're actively working (logged into the app and available) count as business miles, even if you don't currently have a passenger or food in the car. The IRS considers this "on the clock" time. The only miles you can't count are your personal trips or your commute to your starting point before logging in. But once you're logged in and working, those "empty" miles between rides or deliveries are absolutely deductible business miles. This is a huge thing many drivers miss! Make sure you're tracking all those miles - it can make a big difference in your tax bill.

I was worried about the same thing last year, so I asked my brother-in-law who's an accountant. He said just make sure you have good documentation for your mileage. Like a detailed log with dates and miles. The IRS knows rideshare drivers have high expenses, especially with mileage, so the low taxable income by itself isn't a red flag. Just make sure you can back up your numbers if they ask.

That's a relief to hear! I've been using MileIQ to track all my driving so I should have pretty good records. I guess I was just shocked at how much difference the deductions made. Thanks for the reassurance!

Is this something you have to specifically request? I paid a similar notice last year and no one mentioned anything about penalty abatement to me. I had a perfect tax record before that too.

Yes, you absolutely have to specifically request penalty abatement - the IRS will almost never offer it voluntarily! It's not widely advertised, but it's an official IRS administrative waiver. Many people qualify but never know to ask for it. If you paid penalties within the last 2-3 years and had a clean record before that, you might be able to request a retroactive abatement and get those penalties refunded. You'd need to call the IRS and specifically request "First Time Penalty Abatement" for the tax year in question, explaining that you had a good compliance history before that. It's definitely worth trying!

This is solid advice. I work in a tax office and we see this all the time. People bring in final collection notices for issues that could have been easily resolved months earlier. By that point, options are much more limited and the amounts owed have usually increased significantly.

Do you think this rises to the level of actual fraud though? I mean, she did provide incorrect information, but is misreporting health insurance coverage really something they prosecute for? I'm trying to gauge how serious this is.

It likely wouldn't rise to the level of criminal prosecution unless there were other serious issues with the return. The key distinction is between a mistake and willful misrepresentation. If she knowingly provided false information, that technically constitutes fraud, even if the direct financial impact is minimal. That said, for just health insurance misreporting without tax impact, the practical risk is relatively low. The IRS has limited resources and focuses enforcement on cases with significant revenue impact. Still, the safest approach is filing an amended return with the correct information to avoid any potential issues.

That's a really good point. I had a completely accurate return last year that took over 8 weeks, and I got no explanation. My friend filed the same week and got his refund in 10 days. The systems seem pretty random sometimes.