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Level 3

401k contribution question

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! 🙂

2 Replies
Level 15

401k contribution question

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.**
Level 15

401k contribution question

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.
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