W2 box 12, code aa + code d excess the limit of $20500

Forum|Forum|3 years ago
February 1, 2023
3 replies
42 views

code AA + code D = $20860.00

Am I over the limit? What do I need to do? Where can I find the penalty if I over contribute the 401k.

Not A Product Question

dmertz

Level 15

If you were over age 50 at the end of 2022, you do not have an excess contribution because you are allowed a catch-up contribution of $6,500.

If you were under age 50 at the end of 2022, yes, you have exceeded the employee contribution limit and the excess $360 is deemed to be in the traditional account [not the designated Roth account as I had originally posted]. Your employer should have prevented this and risks disqualifying the plan by allowing this. Notify the employer as soon as possible to obtain a corrective distribution.

nerver_recallAuthor

Level 2

As I know the excess amount is just ~$300, and I did not meet the total 401(k) Employer and Employee Annual Contribution Limits, which is $61000. Can I just report those $300 as extra income and keep this $300 in my 401k account? If so, how should I report this as extra income in Turbotax? I'm assuming by doing this, I only need to pay tax of $300 this year, and the tax of $300+ earning when I withdraw. Am I right?

dmertz

Level 15

I've reviewed CFR 1.402(g)-1 which provides the regulations on elective deferrals. It says:

A designated Roth contribution is treated as an excess deferral only to the extent that the total amount of designated Roth contributions for an individual exceeds the applicable limit for the taxable year or the designated Roth contributions are identified as excess deferrals and the individual receives a distribution of the excess deferrals and allocable income under paragraph (e)(2) or (e)(3) of this section.

This appears to imply that if the amount reported with code AA for 2022 is less than $20,500, the excess is in the traditional 401(k) rather than the Roth 401(k) account. I've changed my previous reply to reflect that. In that case, you can just include the $360 as miscellaneous income not already reported on a W-2. Still, the concern in not notifying the employer and taking corrective action is that the employer risks the 401(k) plan becoming disqualified, which could have substantial adverse tax consequences for everyone participating in the plan.