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Retirement tax questions
@tucustomer wrote:
Thanks for update. Do you have any insights on the below as it is crossed Apr 15th dead line.
b) My employer/plan administrator says, the withdrawal amount will be considered as early withdrawal of 2021 contribution and not 2020 contribution. In addition, Federal tax and state tax has to be paid along with early with drawl penalty. Is it true? Will this be early withdraw and penalty will be applied?
c) What happens if existing 401K excess contributions to convert to Traditional/Rota IRA? Do I need to still pay the penalty?
d) What happens if I keep excess 401K contributions in 401k account as I have already added excess contribution in misc. additional income and paying taxes for same amount in this year return.
b) Yes, do not withdraw it - there is no reason to touch it until you retire.
c) There is no tax advantage to do that. A Roth conversations is taxable and Traditional IRA is the same as not doing anything - no gain, not loss, and no reason to do that.
d) Answered above. It just stays in the account and will grow in value with all other money in the account.
When finally distributed it is treated as all other money in the account and will be taxable as ordinary income.