The reason you would pay twice is because of the excess deferrals over the maximum allowed amount if you don't get it out (PLUS earning on that amount) before April 15, 2022.
Unless timely distributed, excess deferrals are:
(1) included in a participant’s taxable income for the year contributed, and
(2) taxed a second time when the deferrals are ultimately distributed from the plan.
- '.....excess deferrals, along with amounts earned on the excess deferrals during the calendar year during which the deferrals are made without regard to income earned during the “gap period” between the close of calendar year in which the excess contribution was made and the time of actual corrective distribution. See IRC Section 402(g)(2)(A)(ii). Additionally, the corrective distribution must be made be made no later than April 15th following the close of the calendar year during which the excess deferral was made.
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