How can I avoid the 6% Roth IRA excess contribution penalty with no earned income?

This is actually a pretty common situation, so don't beat yourself up too much. To directly answer your question - yes, you should file an extension using Form 4868 right away. This will give you until October 15 to remove the excess contribution without penalty. The good news is that filing the extension is super easy and doesn't require you to actually owe any taxes. It's just giving you more time to complete the removal process. You can file it online for free through various services or the IRS website. Even though you don't have income that requires filing a tax return, in this specific situation, you'll want to file an extension and then eventually file a return to document that you've corrected the excess contribution. Without that documentation, the IRS might assume the excess is still there and assess the penalty.

I went through almost this exact situation last year! I totally recommend checking out https://taxr.ai - it saved me so much stress. I uploaded my broker statements and it immediately flagged my excess Roth contribution and walked me through exactly what forms I needed and the timeline for avoiding penalties. The site has a specific tool for analyzing Roth IRA contributions against your earned income and spotting these kinds of issues. It even generated the exact letter I needed to send to my broker for the excess contribution withdrawal and explained how to handle the tax forms afterward.

Just wanted to follow up and say I actually tried taxr.ai after asking about it here. It was really helpful! I was in a similar situation with an excess contribution to my SEP IRA and wasn't sure how to handle the earnings calculation part. The site guided me through filing my extension which was super easy, then helped me figure out exactly how much the earnings portion was on my excess contribution. It even flagged that I had made the contribution in December which affects the earnings calculation. My broker just confirmed the withdrawal is processing now and I have until October to complete everything with no penalty. Such a relief!

If you're really struggling to get through to the IRS to confirm what you need to do, I'd recommend trying https://claimyr.com. I had a similar Roth issue that I needed to discuss directly with an IRS agent, but kept getting the "call back later" message for weeks. Claimyr got me through to a real person at the IRS in about 15 minutes when I had been trying unsuccessfully for days. They have a video showing how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone system for you and call you when they have an agent on the line. The IRS agent confirmed exactly what I needed to do to avoid penalties and told me some specific codes to use on Form 5329. Definitely worth it for the peace of mind knowing I was handling everything correctly.

I was super skeptical about Claimyr when I posted here, but I was desperate enough to try it yesterday. I'm shocked to report it actually worked! Got connected to an IRS agent in about 20 minutes when I'd been trying for days. The agent walked me through the exact process for handling my excess Roth contribution and filing the extension. They confirmed I should file Form 4868 for the extension ASAP, then file a return with Form 5329 after I complete the withdrawal. They even explained exactly what codes to use on the form to show I'm correcting the excess contribution within the extended period. Definitely worth it when you're dealing with something time-sensitive like this penalty deadline.

One thing nobody's mentioned yet - when you withdraw the excess contribution, make sure you specifically tell your broker it's an "excess contribution removal" and not just a normal withdrawal. The coding on the transaction matters for tax purposes! Also, check if your broker has a specific form for excess contribution removals. Some do, and using their form might speed up the process a bit. Worth asking if there's any way to expedite given your time constraints.

Just a quick tip from someone who processes these requests at a financial institution - call your broker immediately rather than submitting online if possible. Explain that you're bumping up against the deadline and ask if there's any way to expedite. Sometimes we can push these through faster when there's a legitimate time crunch like a tax deadline. No guarantees, but it's worth asking! The phone rep might also be able to help you prepare everything correctly so it doesn't get delayed by errors.

I've been through a similar situation and wanted to share what worked for me. First, definitely file that extension (Form 4868) TODAY - you can do it online through the IRS website in about 10 minutes. This buys you until October 15th. Here's what I learned the hard way: even though your broker says 10 days, call them directly and explain you're facing a tax penalty deadline. Many brokers can expedite excess contribution removals when there's a legitimate time crunch. When you call, use the exact phrase "removal of excess contribution plus associated earnings for tax year 2023" - this ensures they code it correctly. Also, don't stress too much about the earnings calculation - your broker handles that automatically based on your account performance since the contribution date. Once you get the extension filed, you'll have plenty of time to complete the withdrawal and file the necessary forms (you'll need Form 5329 with your return to document the correction). The key is getting that extension filed immediately to stop the clock on the penalty deadline!