Maximum contributions to 2 retirement plans (401k & 457b)

Forum|Forum|3 years ago
January 27, 2023
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My wife's government employer offers both 401k and 457b plans. In 2022, she contributed a total of $30,000 to those 2 plans. After entering W-2 info in Turbotax, application is now calling this out as exceeding the "maximum that most people under age 50 can contribute to all salary deferral retirement plans for 2022 ($20,500)". Is that correct?? My understanding was that if the employer offered both plans, then she could contribute to both and essentially double her contribution for the year. If I cannot correct this in Turbotax, does this impact the amount of tax owed/due?

TurboTax Self Employed Online

Best answer by DanaB27

You are correct, she can contribute to both plans, up to 20,500 for 2022 to each (IRS).

I cannot recreate the error. It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online:

From the left menu select Tax Tools.
Then select Tools below Tax Tools.
A window will pop up which says Tools Center.
On this screen, select Share my file with Agent.
You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number.
Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

DanaB27Answer

You are correct, she can contribute to both plans, up to 20,500 for 2022 to each (IRS).

From the left menu select Tax Tools.
Then select Tools below Tax Tools.
A window will pop up which says Tools Center.
On this screen, select Share my file with Agent.
You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number.
Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

frank401kAuthor

Thank you very much. Token number: 1055531. I look forward to hearing back.

DanaB27

I reviewed your return and noticed that your spouse had two W-2s. If you add the contributions on both of her W-2s with code D—Elective deferrals to a section 401(k) in box 12 then this totals more than the allowed $20,500 for 2022.

Please be aware that your spouse can only contribute up to $20,500 across all of her 401(k), 403(b), SIMPLE plans (SIMPLE IRA and SIMPLE 401(k) plans), and SARSEP plans. In addition, she can contribute up to 20,500 to the 457(b) plan. But she contributed more than $20,500 to both of her 401(k) plans. Therefore, the message about the excess contribution is correct.

To fix this she should contact her plan administrator. If the plan permits, the excess amount will be distributed to her. The plan must pay you the amount of the excess, along with any income earned on that amount, by April 15, 2023.

Please be aware, if you do not take out the excess amount by April 15th, then you are taxed twice on the excess deferral left in the plan. This happens once when you contribute it and again when you receive it as a distribution. You can't include the excess amount in the cost of the contract even though you included it in your income.

You will have to include the excess deferral in your 2022 tax return. Please follow these steps to report a 2022 excess 401(k) deferral:

Login to your TurboTax Account
Click "Federal" from the left side of your screen
Scroll down to "Less Common Income" and click "Show More"
Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
On the "Any Other Earned Income" screen enter "2022 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

If you receive the distribution of the excess deferral and earnings then please note for the Tax Year 2023 tax filing due April 15, 2024:

2023 Forms 1099-R will be issued reporting the excess.

Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2022.
However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2023.

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