dmertz
Level 15

Retirement tax questions

I think it's still necessary to tell the employer about the excess contribution.  According to the above-referenced IRS web page, the distribution of an excess contribution after April 15 is taxable even though it was a contribution to the Roth 401(k).  The excess Roth IRA contribution does not add to the contribution basis.  The consequences are the same as if the excess was an excess deferral to the traditional 401(k) account:  double taxation of the excess contribution and a 10% early-distribution penalty on the distribution if made before age 59½.  You can't make the withdrawal until you have a triggering event, either reaching age 59½, becoming disabled or leaving the company.

Had the distribution of the 2017 excess been done by April 15, 2018, none of the distribution, including the attributable earnings, would be subject to an early-distribution penalty.  An early-distribution penalty on the earnings distributed with a return of contribution by the due date of the tax return only happens with a return of contribution from an IRA.