401k contribution question

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Hi all!

I know that the IRS allows us to contribute a max of $19,500 in our 401k account for the tax year 2021 but I had a quick question. Does the IRS calculate this "$19,500 cap" based on PAYCHECK date? Or is it based on the date that the money hits your 401k account?

For example, I received a paycheck on 12/31/2020. However, the contribution didn't actually "hit" my 401k account until 1/4/2021. So does that mean that this contribution counts as a 2020 contribution? Or does it count towards the 2021 contribution? (I've attached a screenshot as well)

I'm just wanting to get a clear answer as to whether or not the IRS counts a contribution based on PAYCHECK date or the date in which the money actually shows up in the 401k trustee /administrator's side. However, if it's based on paycheck date.... wouldn't you think it's kind of odd, since the IRS doesn't view individual paychecks from each company? I mean presumably they don't really care if the company issues 26 vs. 24 paychecks per year or any other company-specific information, right?

Any and all help would be greatly appreciated! Thank you! 🙂

macuser_22

Alumni - Champ

Usually the date that the plan posts it according to the terms of the plan. Ask the plan administrator. Also "plan" years do not have to be calendar years - again as defined by the terms of that particular plan.

**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.**

TomD8

Alumni - Champ

Normally your 401K contributions are reported in Box 12 of your W-2 with letter code D. Thus, if your contribution was credited to 2020, it would have appeared on your 2020 W-2.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.