It depends, if you take out your excess contribution(s) before April 15, 2023 you should be able to avoid the excess penalty. TurboTax will calculate your excess contribution. That is the amount that must be taken out including gains, and if no gains you must take the full excess contribution amount out before April 15, 2023. No capital gains loss on 401k, since tax treatment is different when withdrawing tax deferred savings or a retirement plan. When you start withdrawing your basis and gain may be taxable if these were tax deferred contribution(s), based on current guidance.
If the total of a plan participant's elective deferrals exceeds the limit under IRC Section 402(g), to avoid failing IRC Section 401(a)(30), the excess amount plus allocable earnings must be distributed to the participant by April 15 of the year following the year of deferral. Excess deferrals not timely returned to the participant are subject to additional tax.
Timely withdrawal of excess contributions by April 15
- Excess deferrals withdrawn by April 15 of the year following the year of deferral are taxable in the calendar year deferred.
- Earnings are taxable in the year they're distributed.
- There is no 10% early distribution tax, no 20% withholding and no spousal consent requirement on amounts timely distributed.
@JimFisher
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
