Getting an error message that I contributed too much to 401ks. Got a 403B with employer and a 401K/TSP with the Army Reserves. I contribute to both.

[4lunatics]

I've always contributed to both.

[dmertz]

Ignoring any special catch-up contributions permitted to a 403(k) for employees with 15 years or more of service, the employee deferral limit is a limit on the combined total of employee deferrals to all of these plans.  For someone under age 50 the combined total is not permitted to exceed $22.500 for 2023 and for someone age 50 or over the total is not permitted to exceed $30,000 for 2023.

If you made a special catch-up contribution to the 403(b), TurboTax doesn't know that the special catch-up contribution is permitted and will erroneously flag the special catch-up as an excess contribution.

[4lunatics]

The 2023 combined limit for 50 and over is $73,500.  I have an employer 403B and a military TSP, 401K.  So I can contribute  the max under both without an error.  The software is wrong!

[dmertz]

Without being eligible to make a special 403(b) catch-up contribution of $43,500 (or maybe a make-up contribution under USERAA, reported in box 12 of your Form W-2 with a year designation next to code D or code AA), there are no circumstances where the combined limit for 2023 is $73,500.  The maximums are as I stated.

[Opus 17]

Don't confuse the maximum total contribution with the maximum deferral.  For example, just looking at 403B plans for people under age 50, the wage deferral limit is $22,500 and the overall limit for employee+employer contribution is $66,000.  That does not mean you can defer $66,000 of your own salary, your deferral is still limited to $22,500.  The rest would have to come from an employer match, if they offer one. 

[4lunatics]

I contributed $30K in my employers 403B and $30K in my Army TSP (401K)...which I always do...every year.  This year I get an error message that I overcontributed.  Did I screw up?

[ThomasM125]

You are under the combined contribution limit of $66,000, but you can only do a salary deferral of $30,000 total, assuming you are 50 years old or more. So if you contributed $30,000 and your employer contributed $30,000 you are OK. Otherwise, you have overcontributed.

[dmertz]

Yes, by doing this over the years it seems that you have massively underreported taxable income.  Given the large amount of underreporting each year, it's likely that the statute of limitations for the IRS to assess taxes is extended to 6 years (separately for each year that you did this).

Another way to state the limitation is that sum of the amounts with codes D, E, F, S, AA or BB from all of your 2023 Forms W-2 is not permitted to exceed $30,000 for someone age 50 or over in 2023.

The $73,500 limit is a per-plan limit (defined in section 415(c) of the tax code) for someone age 50 or over, not an individual's limit, but that includes employer contributions.  The individual's employee deferral limit is as we have described and is a combined limit (defined in section 402(g) of the tax code) that applies to the individual across all of the 401(k), 403(b), federal TSP, SIMPLE and SARSEP plans in which the individual participates.

I'm not going to comment on how to go about addressing such a large, multi-year error.  It might make sense to consult with a tax attorney.

[4lunatics]

I spent an hour on live chat with Turbo Tax and they talked with the techs and said Turbo Tax is being updated tonight regarding the error I received.  I'm getting mixed advice.  Turbo Tax rep said I can contribute separately to both plans and the software will be updated.  My employer has a 403B, 457 and a Cap Account because we have high income earners.  I have coworkers who contribute the combine max in all.  So, now I'm super confused.

[dmertz]

The 457(b) has a separate $30,000 employee deferral limit (age 50 or over) because it's defined under section 457(c), not section 415(c) as the others are.  You can defer $30,000 to the 457(b) and separately $30,000 to all of the others combined.  I though of mentioning that in my previous post but chose not to since the subject of 457(b) deferrals had not yet come up and I didn't want to add what would have been extraneous information.

Don't assume that a TurboTax phone rep has any particular knowledge of the tax code.

[Opus 17]

@4lunatics 

You have to be really careful here.  You have mentioned a 401(k), 403b, 457, and TSP.  They are not the same thing and are governed by different sections of the law, even though they are similar in operation.  Some have combined limits, as explained before, and some have individual limits.  You, or your tax advisor, need to know exactly which type of plans you contributed to, to understand the limits and whether you have exceeded them.  If the plans changed year over year, the rules may change as well.  

[dmertz]

In recent years, TurboTax developers have been adding various checks for over contribution.  I'm going to experiment with TurboTax for the past few year to see when TurboTax started checking the combined contributions to plans subject to section 402(g).

[Edit]

2022 TurboTax is the first version that had any checking for over-contributing based on W-2 box 12 entries and it implemented the check on the combined amounts subject to section 402(g) as does 2023 TurboTax.

[dellamh1967]

How can I correctly enter special catch-up contributions ($3000) to my 403(b) beyond the $30,000 limit for 2023 without Turbotax interpreting it as overpayment?

I double checked with my employer that I am eligible for up to $3,000 beyond the $30,000 limit for 2023.  However TurboTax offers me no opportunity to override the message that I made $3k overpayment.  Back in 2020 (below) you mentioned you ignore the message and file my mail (paper).  Is this how to handle for 2023 taxes in TurboTax (deluxe pkg)?  Thanks in advance.

• TurboTax Deluxe Online

posted

‎May 26, 2020 5:31 PM

last updated ‎May 26, 2020 5:31 PM

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dmertz

Level 15

 

Enter the amounts shown in box 12 of your W-2 exactly as they are, only in box 12 of TurboTax's W-2 form, nowhere else in TurboTax.  Do not enter them as IRA contributions, a 403(b) is not an IRA.

Although I think it's unlikely, if TurboTax warns you during entry of the W-2 that you are over the contribution limit, ignore the indication.  If TurboTax will not allow e-filing with this condition present in your tax return, file by mail.

‎May 27, 2020 6:57 AM

[dmertz]

TurboTax has no ability to recognize special catch-up contributions to a 403(b), so you'll have to just ignore the warning.