Just a heads up that if you decide to take the distribution, Fidelity will issue you a 1099-R for the distribution in January 2025 (for your 2024 taxes). Make sure you keep documentation showing this was a return of excess contributions so you can properly report it on your taxes. The form might not be coded correctly to indicate this was a correction, so you might need to explain it when filing.

One additional thing to consider - make sure you understand the timing requirements. The IRS requires that excess contributions be distributed by the tax filing deadline (including extensions) for the year the excess occurred. For 2023 overcontributions, that would typically be April 15, 2024, or October 15, 2024 if you file an extension. If you miss this deadline, you can still take the distribution later, but it becomes more complicated tax-wise. You'd potentially face the 6% excise tax for 2023, then need to take the distribution in a subsequent year (which would be taxable in that year), and you'd need to file Form 5329 with your tax return. Given that we're already past the April deadline, I'd recommend checking if you filed an extension for your 2023 taxes. If not, you might want to consult a tax professional about the best way to handle this situation going forward.

Just to throw in my experience - I skipped filing Form 6251 last year when I had a small ISO exercise (around $6,000 spread) because my calculations showed I owed zero AMT. Got a letter from the IRS three months later asking me to submit the form. Wasn't a full audit or anything, but definitely created extra work I could have avoided.

Based on everyone's experiences here, it sounds like Form 6251 is pretty much required when you have ISO activity, even if you don't owe AMT. I'm dealing with a similar situation - exercised some ISOs last year and trying to figure out the most cost-effective way to handle my taxes. Has anyone tried just preparing the Form 6251 by hand and then entering the results into FreeTaxUSA manually? I'm wondering if that might be a middle-ground approach that avoids the expensive software while still meeting the IRS requirements. The form itself doesn't seem too complex if you have your Form 3921 information handy. Also curious if there are any good resources or guides specifically for calculating AMT on ISOs that don't require expensive software subscriptions?

Just dealt with this exact scenario last month! Had a client with twins born in late November, SSNs issued in December. Same rejection code you got. What worked for us: I called the practitioner priority line (as Mason mentioned) and the rep actually walked me through a workaround. There's a specific form you can attach to a paper return called Form 8948 that expedites processing for SSN database mismatches. The key is writing "NEW DEPENDENT SSN - DATABASE MISMATCH" in red ink across the top of the first page. We paper filed with this approach and got the refund processed in just under 5 weeks, which was way faster than the 8-12 weeks they initially quoted. The rep also mentioned that February-March is actually prime time for these issues since so many December babies get their SSNs in January. One tip: make copies of everything and send via certified mail. The IRS has been losing a surprising number of paper returns lately, and you'll want that tracking confirmation.

This is such a frustrating but common issue! I've been dealing with these SSN database lag problems for years. One thing I'd add to the great advice already given - if you do decide to paper file, make sure to include a detailed cover letter explaining the situation and attach a copy of the SSN card and birth certificate. I've found that being very explicit about the timing (child born December, SSN issued January, filed in [current month]) helps the processors understand immediately what's happening and can sometimes speed up the review process. Also, definitely keep trying to e-file every 2-3 weeks if your clients are willing to wait. I've had cases where the SSN suddenly appeared in the system after 6 weeks, and others that took 10+ weeks. There's really no rhyme or reason to the timing. One last tip - if you do paper file and don't hear anything after 8 weeks, you can call and request a "tracer" on the return. Sometimes paper returns get stuck in processing and the tracer can help locate and expedite them.

I've been dealing with K-1 forms for a few years now and this is such a common frustration! The issue you're running into is that FreeTaxUSA, while great for most standard tax situations, has limitations when it comes to the more complex aspects of partnership tax reporting that K-1s often involve. Since you mentioned this is from a rental property investment, there are likely passive activity rules at play that require additional forms like Form 8582. Even though your situation might seem straightforward, rental property partnerships often trigger these rules automatically, and FreeTaxUSA just doesn't have the capability to handle the calculations properly. I'd strongly recommend switching to software that can handle K-1s properly rather than trying to work around it. TaxAct Premium seems to be the most cost-effective option that people have had success with based on the other comments here. Yes, it's more expensive than FreeTaxUSA, but filing incorrectly because of software limitations could cost you way more in the long run if the IRS flags your return for review. Don't feel bad about having to switch - this happens to tons of people every year when their tax situation gets just a bit more complex than basic software can handle!

I've been through this exact frustration with FreeTaxUSA and K-1 forms! The issue usually comes down to specific reporting requirements that FreeTaxUSA simply can't handle. For rental property K-1s like yours, it's almost always related to passive activity loss rules or at-risk limitations that require additional forms. Here's what I'd recommend: First, check Box 20 on your K-1 for any letter codes - if you see codes A, B, C, or D, that's definitely what's causing the error. These codes indicate you need Form 8582 for passive activity limitations, which FreeTaxUSA doesn't support well. Based on everyone's experiences here, TaxAct Premium seems to be the sweet spot for handling K-1s without breaking the bank. It's more than FreeTaxUSA but way less than TurboTax Premier, and it actually knows how to properly process all the passive activity rules and generate the right supporting forms automatically. Don't try to manually enter K-1 info in other sections of FreeTaxUSA - that's asking for trouble with the IRS. K-1 income has to flow through specific schedules and forms to be reported correctly. Better to spend a bit more on proper software than deal with potential audit issues later!

Make sure you're also considering state taxes in your calculations! I completely forgot about state-level capital gains taxes when doing my estimates last year and got hit with an underpayment penalty in my state.

Great thread everyone! I've been dealing with a similar situation and wanted to add a few practical tips from my experience: 1. **Keep detailed records** - Make sure you have documentation of your carried-over losses from previous years' tax returns (Schedule D from each year). The IRS won't calculate this for you. 2. **Consider timing of future trades** - Since you're required to use all carryover losses this year, think strategically about any additional trades you might make before year-end. You might want to harvest some gains now while you have losses to offset them. 3. **Don't forget about the wash sale rule** - If any of your current gains or previous losses involved stocks you bought/sold within 30 days of each other, the wash sale rule could complicate your calculations. 4. **Plan for next year** - After using up your $93k in carryover losses, you'll be starting fresh next year. Consider whether you want to harvest any losses before December 31st to have carryovers available for 2026. The key takeaway everyone's mentioned is correct - you must use ALL carryover losses against current gains. But proper planning around this requirement can still help optimize your overall tax situation!