Is there a time limit on recharacterization though? OP is talking about a 2021 contribution which was over 2 years ago. I thought recharacterization had to be done before the tax filing deadline?

You're absolutely right, and that's a critical point I should have clarified. Recharacterizations do need to be completed by your tax filing deadline including extensions (typically October 15th of the year following the contribution). For a 2021 contribution, that deadline has long passed, so recharacterization isn't an option anymore. At this point, the return of excess is indeed the only way to correct the issue. Thanks for pointing this out - I should have been clearer about the timing limitations.

That's a dangerous approach to take. Yes, the excess contribution penalty is 6% per year, but it continues EVERY year until you fix the problem. So it's not just a one-time $270 penalty - you'd pay that $270 every single year indefinitely until you correct the excess contribution. Plus, having known excess contributions in your account could potentially cause issues if you ever get audited. The IRS might view it as an intentional violation once you're aware of the problem. Better to fix it now and just pay the penalty for the years it was already in there.

That makes sense, I didn't realize the penalty continues every year! Definitely not worth saving a little hassle now to keep paying penalties forever. Thanks for explaining that - I'll call Vanguard tomorrow to start the process of removing my excess contribution too.

It has my SSN on it! That's why I'm so confused and worried. It specifically mentions the "employer's share" but it's addressed to me personally with my social security number. I've worked for this company for 5 years but I'm just a regular employee - not a manager, not an owner, nothing. I just do construction work.

That's definitely concerning that it has your SSN on it. This suggests either a serious IRS error or potentially something more problematic is happening with your employer. Here's what I recommend: 1) Call the IRS using the number on the letter and explain you're just a regular employee with no financial authority, 2) Request a copy of any tax filings that listed you as responsible for the company's taxes, and 3) Document everything including the person you speak with. There's a small possibility your employer may have listed you as an officer or responsible person without your knowledge, which would be very problematic. Don't ignore this - addressing it promptly is important.

I did do some side jobs on weekends during 2020-2021, but I didn't think it was enough to matter. Maybe like $5,300 total across both years. I reported it on my taxes but I didn't know anything about deferring Social Security taxes - I definitely never consciously chose to defer any taxes!

This is probably it. If you reported self-employment income on Schedule C during 2020, you were eligible to defer the employer portion of self-employment taxes under the CARES Act. Some tax software automatically applied this deferral as a benefit without making it super clear to users. The deferred amounts were due in two payments - 50% by December 31, 2021, and the remaining 50% by December 31, 2022. If you didn't make those payments, that would explain the letter you're getting now.

Can I even open my own bank account at 17 though? I thought you had to be 18 to do that without a parent.

Most major banks offer teen checking accounts starting around age 13-16, but they typically require a parent as a co-owner until you're 18. However, some credit unions and online banks have better options for minors with more privacy. Even with a joint account, your dad would technically be violating the account agreement if he took money that was clearly yours (like a tax refund) for his own use. You could also consider asking another trusted adult (like an aunt, uncle, or grandparent) to help you open an account instead of your dad.

What tax software did you use? I'm in the same situation and need something simple.

Do you know how much it typically costs to file an amended return if you use a tax preparer? I'm in a similar boat but with a $120 discrepancy and wondering if it's worth paying someone to fix it.

Most tax preparers charge between $75-150 to file an amended return, even for something simple like this. This is why many people choose not to amend for very small amounts - the preparation fee often exceeds the tax difference. If you're comfortable doing it yourself, you can file a 1040-X for free. It's not extremely complicated for a simple W2 correction. You'd just need to fill out the form showing the original amounts, the corrected amounts, and the difference, then provide a brief explanation like "Received W2c from employer with wage adjustment.

Yes, your employer sends the corrected W2c to the Social Security Administration, which then shares the info with the IRS. So the IRS will eventually have both sets of numbers. This is actually why small discrepancies like this sometimes get flagged in their automated system - their records won't match what you filed.

But if I started my foreign assignment on April 15, 2022 (earlier than the example's June 1), wouldn't the period from May 13, 2022 to May 12, 2023 work just fine? All those days would still be within my foreign presence period, right?

If you started your foreign assignment on April 15, 2022, then yes, a period from May 13, 2022 to May 12, 2023 would technically work for you. But the IRS example is specifically dealing with someone who began their foreign presence on June 1, 2022. The key is finding the optimal 12-month period that maximizes your qualifying days. If you started on April 15, you might actually have a different optimal 12-month period than the one in the example. You'd need to count forward 330 days from your start date (accounting for any US visits) and then establish your specific 12-month period.

As far as I know, the basic mechanics of the physical presence test aren't changing for 2025. The 330-day requirement and 12-month period calculation should remain the same. What might be getting more scrutiny is whether digital nomads truly have a "tax home" in a foreign country, which is a separate requirement for the FEIE.