401k - excess contribution

If a client had 2 jobs and contributed more than the max of $16,500 to their 2010 401k, what is the proper procedure to handle this excess contribution (they have already filed their 2010 tax return)?

Reply to
Luka
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Fairmark, run by Kaye Thomas, is a reputable site. I found this

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on thesite.

A summary: If you don't remove the excess contribution by April 15 of the following year, you will be taxed on it twice. If the client had the maximum of $16,500 (or $21,500 if over 50 years old) at one job and the excess comes from another job or jobs, the easiest way to handle it is to take all of the money out of the other plans. (You have to remove the contribution and the related earnings on the excess.)

I hope this helps. Gary

Reply to
Gary Goodman

Try to get one of them to return the excess, and quickly. Usually the current employer is a better shot, but neither plan is required to return it.

Meanwhile, (s)he needs to amend the 2010 return and include the excess deferral as income. (I'm assuming this adjustment wasn't made on the original return.)

See Pub 525.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

Shouldn't s(he) first see if s(he) can get the excess deferral back from the 401(k) s(he)'s currently working at? If yes, then no amended return is required. If no, then an amended return is required. I believe they won't charge you interest from 3/20 to 4/15 if you pay by

4/15.
Reply to
removeps-groups

Related

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I think the difference is I had not yet filed.

-Antony

Reply to
Antony

Whether or not the excess is returned income was understated on the

2010 return filed using the W-2 Box 1 wages, which reflected the excess. The difference is that if the excess is returned in time you don't have to pay tax on it again when it's finally paid out.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

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