@kiz wrote:
i’m in the same boat. dealing w excess after the april 15 deadline. what’s the best course of action? do i need to withdraw the excess? can i / should i keep it in the account? is there anything special that needs to be done w filing my taxes for 2021? or can i file as per usual? (i filed an extension to sort this out) thanks so much in advance.
If not removed by April 15, then it should not be removed at all since after that date it becomes taxable income that must be reported on line 1 of the 1040 form as wages since it was deducted from wages when the employer withheld if from your pay. It will just stay in the account until retirment when it will be taxed again. This double tax is the penalty for not meeting the Apr. 15 date.
Excess 401(k) deferrals should be reported in:
(There are several screens to click through to get to the right place)
Miscellionious Income ->
Other Income not reported on a W-2 ->
Other wages (yes) ->
House Hold employee (Continue) ->
Sick Pay (Continue) ->
Other earned income (yes) (Includes excess salary deferrals)->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.
This will add the returned excess to your 2021 wages on line 1.
For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf
**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.**
