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njresident
Level 2

401k excess deferral-which account is considered in excess?

I switched jobs in the middle of 2019 and hence have multiple pretax 401k accounts(traditional). I have excessive deferral when i combine my contributions to both accounts(14k to each account) and i am planning to let them remain in the current status(willing to pay tax twice). I was windering which account is considered to hold the excess deferral- first or second one, or either of them?

2 Replies
macuser_22
Level 15

401k excess deferral-which account is considered in excess?

The account that put you over the top.  But that makes no difference on your tax return since only the excess must be reported as wages in the tax year that the excess was made.  Since yiu will not take it out and will not receive a 1099-R then report it as follows:

 

Excess 401(k) deferrals should be reported in:
(There are several screens to click through to get to the right place)

 

Miscellionious Income ->
Other Income not reported on a W-2 ->
Other wages (yes) ->
House Hold employee (Continue) ->
Sick Pay (Continue) ->
Other earned income (yes) (Includes excess salary deferrals)->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.

 

This will add the returned excess to your 2019 wages on line 1on the 1040 form.

 

For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf

**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.**
njresident
Level 2

401k excess deferral-which account is considered in excess?

Thanks for replying- my question was specifically with regards to my state tax obligations. Treating the excessive deferral to have occured from first account means that i am supposed to pay state tax on this amount to my earlier state of residence, while if i treat the second 401k account as excess deferral, it would meanthat i would have to pay state tax to the second state

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