W-2 box 12 exceeds limit

Apr 18, 2011 6 Replies
P

I was employed by two companies in 2010 (one after another after being laid off). It appears I may have put contribute too much into my



401k. The sum of the numbers in Box 12 of the W-2 form is much higher than the limit (16500 + 5500 for catch-up). Possible error made at the time I switch form one ocmpany to another.

Any suggestion what I should do to correct this error? I decided to file for extension to buy some time until I know what approach to take to correct the error.



Thank you in advance for your help. pax


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P

At this point it may be too late. You can try to get the excess distributed from either plan, but they're not required to do so. The one thing you must do regardless of whether you can get the money out or not is include the excess in your 2010 wages on line 7 of your

1040. See the discussion on page 10 of Publication 525.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

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P

Thank you Phil. That helps!

BTW, If I withdraw this excess amount now, will I be able to deduct this amount from 2011 tax since I have already paid for it this year? pax

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A

If you add the excess to line 7 now, and if you get a Form 1099R next year with a P in box 7, you will have already handled it. If you get an 8 in box 7, you will have some explaining to do next year. Neither of which gets you out of the penalty for 2010. But leaving the excess

2010 funds in your account and contributing that much less for 2011 will let you catch up and be even for 2011 and beyond.
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P

No. Since you didn't get the excess 2010 deferral returned to you by

4/15/2011 you will pay tax twice on the amount: 2010 and whenever it comes out. See "excess distributed to you" in the Pub 525 reference. At this point my advice is to leave it alone, learn from the experience, and move on. All the damage has been done.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

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Art, this doesn't make sense. There is no excess contribution penalty other than having to pay tax twice on the excess. The method you mention applies to excess IRA contributions, but not excess deferrals.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

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A

Right, thanks for the catch.

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