Question

401K overcontribution penalty

Forum|Forum|5 years ago
April 4, 2021
1 reply
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Is there any penalty or negative tax implications if I accidentally over-contributed about $2000 to my 401K account in 2020? (I used Fidelity to automatically deduct a percentage from my pay check each month for 401K.)

Does the normal annual 401K plan cycle for employee and employer contribution starts from January and end on December each year?

Thank you.

TurboTax Premier Online

M

MAK70

Excess deferrals are (1) included in a participant’s taxable income for the year contributed, and (2) taxed a second time when the deferrals are ultimately distributed from the plan. A participant who fails to receive a distribution of the excess deferrals does not receive basis in his pre-tax deferral account equal to the amount of excess deferrals.

The amount of the excess deferral will not be taxed twice if a corrective distribution is made.

Yes in general, most 401(k) have a calendar contribution year.

See Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan.