401 k failed nondiscrimination test refund check

[Leoesp]

I made 23k 401 k contribution for 2024 but I got a refund of 6k due to failed nondiscrimination test since in reality just contributed 17k can I cash the check and open and ira and make the contribution for 2024

[MinhT1]

1. As the money has been refunded to you, it is your money and you can cash the check and use the money as you want.

2. Look at your form W-2 and the amount reported in box 12 with code D. If the amount is $17,000, then all is fine.

If the amount is $23,000, then you will receive a 2025 form 1099-R (in beginning of 2026) and you'll report the refund to be taxed in 2025. See this IRS document.

3. For the contribution to an IRA, you have until April 15, 2025 to contribute for tax year 2024. 

To help you decide, here is my advice:

You are covered by a retirement plan at work. So depending on your filing status and your MAGI, the deductibility of your contribution to a Traditional IRA may reduced or eliminated.

You can check the deductibility by reading this IRS document.

If your Traditional IRA is not deductible, then you may check whether you can contribute to a Roth IRA by reading this IRS document.

[Edited 03/05/25 | 1:51 PM PST]

@Leoesp 

[Leoesp]

The letter that came with the check says that it has to be tax for the year in which was received 

[MinhT1]

I have edited my answer.

[Leoesp]

If I contribute the money to a Roth IRA for year 2024 do I need to amend my income taxes that I already filed   . I do my income as married filling jointly and I don’t make more than 240k , my wife does not have an income.

[fanfare]

TurboTax will tell yu if your contribution is allowed or deductible or either.

Enter the proposed amount now to get the answer.

Be prepared to back it out if results are not good and/or you decide not to do it.

@Leoesp