FTC vs FEIE with Roth IRA
First time poster! I am a silly, young, little idiot living abroad (Spain) who has not really thought about US tax responsibilities in the last few years. I’m filing late for 2024 and 2025 now 😅 there’s one thing I am super hung up on and confused about.
I opened a Roth IRA in 2024 and contributed the max amount. As mentioned, I didn’t file taxes for 2024 so this is a mistake that I have to correct now. My initial Google searches told me I should file using the FTC (1040 with 1116) so I could prove I had enough taxable income in 2024 to open the account. I also understand I need to pay a penalty for the years I’ve had the Roth open without having filed taxes by using form 5329? This was my plan but the late fees and amount I owe feels so disproportionately high to what I earned! So now I’m second guessing.
I am also reading mixed things on using the FEIE while having a Roth IRA. I initially thought you can’t use the FEIE in a year you contributed to a Roth because it means you’re claiming no US taxable income, but I also read that there are exceptions with Roth contributions for people living abroad and that your foreign earned income IS eligible? So now I’m confused if I’m causing myself all this trouble (and money!) with the FTCs for nothing.
Would love any help, I have been filling out forms by pencil for about 6 hours trying to understand 😩
*edit for more info: I am 27, single, live full time in Spain with a Spanish salary since 2022, my only US income is from brokerage accounts