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February 19, 2024
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Deductions and Credit, Interest and Dividends

  • February 19, 2024
  • 1 reply
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I have Traditional IRA 401K that is not an employer 401k. I set up the Traditional IRA 401k through a investment group, Janus Henderson Investment. I contribute $50 a month, a total of $600 a year. Nothing close to being over $6500. I have already submitted my 1099-DIV under Wages and Income. Under Deductions and Credits, Interest and Dividends, Traditional IRA, 401K, I enter that I contributed $600 for 2023, nothing close to the $6500 threshold. At the end of the section it says I owe a 6% penalty for excess contributions. Why is it telling me owe money when I don't owe penalty tax?

    Best answer by dmertz

    IRAs and 401(k)s are entirely different kinds of retirement accounts.  An account can't be both.

     

    My guess is that you've been contributing to a traditional IRA, not to a 401(k), but you do not have the  necessary compensation from working (Box 1 of a W-2 minus any amount in box 11, or net earnings from self-employment) to be able to support an IRA contribution, resulting in your traditional IRA contributions being excess contributions.

    1 reply

    dmertzAnswer
    Employee
    February 19, 2024

    IRAs and 401(k)s are entirely different kinds of retirement accounts.  An account can't be both.

     

    My guess is that you've been contributing to a traditional IRA, not to a 401(k), but you do not have the  necessary compensation from working (Box 1 of a W-2 minus any amount in box 11, or net earnings from self-employment) to be able to support an IRA contribution, resulting in your traditional IRA contributions being excess contributions.