@DawnC wrote:
You have until 05/17/21 to remove the excess contributions and earnings to avoid a penalty. If you don't remove it, add the excess contributions back to your wages.
That is not correct. IRA excess can be removed by the filing date or extended filing date not 401(k) excess.
May 17 is the filing date. The date for elective deferral corrections is set by law to be April 15 and is not tied to the filing date. The filing date can be changed by the Secretary, as it was for 2020, but the April 15, excess date can only be changed by a tax law change.
That has mislead some taxpayers to believe they have until May 17 to remove the excess only to find out from the plan administrator that 4/15 was the actual date.
See internal Revenue Code 26 CFR § 1.402(g)-1(e)(2)(i)
(2) Correction of excess deferrals after the taxable year. A plan may provide that if any amount is an excess deferral under paragraph (a) of this section:
(i) Not later than the first April 15 (or such earlier date specified in the plan) following the close of the individual's taxable year,
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
