19 Isn't there a penalty if you don't pay enough throughout the year though? How do you figure out the right amount for quarterly payments?

4 There can be a penalty if you significantly underpay throughout the year, but you can avoid this by making sure your total payments (withholding plus quarterly payments) equal at least 90% of your current year tax or 100% of your prior year tax (110% if your income is over $150,000). For figuring out the right quarterly payment amount, you'd take your expected additional tax from the side gig (including both income tax and self-employment tax which is about 15.3%) and divide by 4. For someone making $6,800 extra, the self-employment tax alone would be about $960 for the year, plus whatever income tax applies based on their tax bracket.

1 We do have tax forms and publications available, and I did offer those resources! But as anyone who's looked at IRS instructions knows, they can be pretty complicated to understand if you're not familiar with tax terminology. The patron seemed overwhelmed and was looking for someone to actually walk him through his specific situation, which is beyond our role as librarians. That's why I referred him to his employer's payroll department or his tax preparer. I was just personally curious about how this situation should be handled, especially with the newer W-4 format. The responses here have been really helpful!

Thanks for sharing your timeline! Did you check the Where's My Refund tool at all during your wait? Just wondering if it was accurate or if your money showed up before the tool updated.

I checked Where's My Refund every few days. It was pretty accurate - showed "Return Received" until Feb 15, then switched to "Refund Approved" with my expected deposit date listed as Feb 17. The money actually hit my bank account around 3am on Feb 17, exactly as predicted. The tool only updates once a day (usually overnight), so it's not worth checking multiple times daily. If you have the IRS2Go app, it'll give you the same information but it's a little more convenient than going to the website each time.

I claimed EITC and got my refund in the second wave. They legally can't issue EITC refunds before mid-February. Filed Jan 20, accepted Jan 21, approved Feb 18, DD Feb 22.

So if I understand correctly, I could leave my $2100 excess in there, pay the 6% tax one more time for 2024, but then for 2025 I would only contribute $2050 instead of the full $4150? And then everything would be back to normal going forward? That actually sounds easier than trying to get my HSA administrator to do a special withdrawal.

Exactly right! You'll pay the 6% tax ($126) one more time when you file your 2024 return, but then for 2025, you'd only contribute $2050 instead of the full $4150. This way, your total 2025 contribution (including the $2100 excess that remained in your account) equals the maximum allowed contribution. After that, everything is back to normal for 2026 and you can resume contributing the full annual limit. Many people find this approach simpler than dealing with the withdrawal process, especially if your HSA administrator has a complicated process or charges fees for excess contribution withdrawals.

The 6% excess contribution tax applies to the tax year in which the excess contribution occurred. So if you over-contributed in 2023, you'd pay the tax when filing your 2023 tax return (which you'd typically file in early 2024). If you don't correct the excess contribution by withdrawing it or using it up (by contributing less in a later year), then you'll continue paying the 6% tax in each subsequent year until the situation is fixed. That's why the original poster is facing another 6% tax for 2024 - because the excess from 2023 is still sitting in their HSA.

What about any earnings that might accrue between contribution and conversion? Like if the money sits in the traditional IRA for a few weeks and earns interest?

Great question! Any earnings that accrue between your contribution and conversion are actually taxable when converted. Your basis only covers your original contribution amount. For example, if you contribute $6,500 to your traditional IRA (your basis), and it earns $50 before you convert it, when you convert the full $6,550 to Roth, you'd owe income tax on that $50 of earnings. That's why many people do the conversion very quickly after the contribution - to minimize any taxable earnings in between steps.

You should probably file Form 8606X to amend previous years. The IRS can assess penalties for incorrect 8606 forms even if you didn't underpay your taxes.

Did you claim EITC or Additional Child Tax Credit? Those always take longer - the IRS by law can't release those refunds before mid-February regardless of when you filed.

I use it every year and find it pretty accurate. "Still processing" usually means your return is in the queue but hasn't been reviewed yet. Don't worry too much unless it's been more than 21 days since you e-filed.

The app just pulls the same data as the Where's My Refund tool on the website. If you're seeing "still processing" after 2 weeks, it might be worth calling the IRS. Sometimes there are verification issues they need to resolve but they don't always notify you proactively.