Hi All, I'd like to ask some advice regarding an excess contribution issue. Last year, I made a job change and, in the process, made deferred contributions to two seperate 401-k plans. Because I didn't watch closely enough, I over-contributed for 2006. This weekend, I began my taxes with TurboTax. While it identified that I contributed too much, it doesn't provide a remedy--other than read IRS publication 584. I read through it but still don't understand how to fix this situation. Can anyone advise me? Thanks,Brendan
I found this with a quick Google search:http://www.fairmark.com/rothira/roth401k/excessdeferrals.htmYou can also contact the IRS at 800-TAX-1040. They're usually pretty helpful.
Last year, I made a job change and, in the process, made deferred contributions to two seperate 401-k plans. Because I didn't watch closely enough, I over-contributed for 2006. The excess deferral is line 7 wages on your 2006 1040. If you can get the excess and earnings returned to you from either of the plans in time there will be no further consequence. See the discussion on page 9 of IRS Publication 525.Phil
Phil and Delta, Thanks very much for the help. I've contacted my employer and the benefits rep is checking into whether or not they will be able to correct the situation for me. If not, I'll go to line 7 on the 1040 and make the adjustment. Could kick myself for not watching this closer. Thanks agian.
thisguyntx writes (in part):I read through it but still don't understand how to fix this situation.I reply:The key words you'll be looking for when you read the Publication to which Phil referred you are "excess deferral." That's what you've done. An "excess contribution" is a slightly different animal (that's what happens when some of your contributions need to be returned so that your plan doesn't fail antidiscrimination tests), with different and more forgiving deadlines and consequences.If memory serves, you need to hurry -- things get worse for you if you don't fix this by February 15. --Bob
Thanks for the clarification, Bob. I'll go ahead and share the outcome here in the event it may help someone. My company rep called me back this morning and said that corporate had approved re-classifying my excess as a post-tax contribution and will send out a corrected W-2. So, I won't receive any money back directly, but I believe I won't have to suffer the tax consequences either.
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