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March 24, 2025
Question

Excess Retirement Contribution

  • March 24, 2025
  • 1 reply
  • 0 views

Hello,

I contributed $46401 in to my retirement account.

$30500 in 459

$15901 in 401K

 

The excess amount was rolled over into 401K.

My W2 shows excess contribution , and $15901 will be treated as Wages, therefore I will have to pay taxes on that.

How do I avoid double taxation?

 

    1 reply

    DaveF1006
    March 24, 2025

    First of all, you weren't taxed on the deferral on your W2. This was treated as a tax free contribution, or should been treated as a tax free contribution.  Contrary to your belief, you weren't taxed on this contribution.

     

    Next, you need to tell the trustee that you need to withdraw this from your 401K. The IRS mentions this in this publication. This withdrawal request must be done before April 15.  

     

    Next since the amount isn't taxable, we must report the withdrawal as taxable compensation.  To report this:

     

    1.  Go to income
    2. Less Common income
    3. Miscellaneous income 
    4. other income not reported on a W2 ( This may have been reported but not treated as income).

    Next year, you will receive a 1099R that reports the excess contribution withdrawal. The 1099r will not be taxable income to you however because of the codes that will be given in Box 7 of the 1099R form.

     

    Please read the link provided for further details.

    Consequences to a participant who makes excess deferrals to a 401(k) plan

     

    [Edited 03/25/25|11:15 am PST]

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    jsingh29Author
    March 24, 2025

    Thank you Dave.

    Before I start receiving payments from 401K, do I need to let the Financial Institute know that taxes on the $15901 was paid already?

    Will I need to send my Tax return to justify for the taxes paid?