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I over-contributed to self-employed 401k, how can i carry it over to next year?

I over-contributed to self-employed 401 k, and passed the deadline to remove the excess amount.  How can carry the excess amount to next year?

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Level 15

I over-contributed to self-employed 401k, how can i carry it over to next year?

Talk to the plan administrator....

Consequences After April 15

In many cases, individuals don’t notice that they’ve over-contributed to a 401(k) plan. So, what happens if you contribute too much but don’t notice it before April 15?

In this case, the excess contribution is effectively taxed twice. You’ll pay tax on the excess in the year it was contributed to the 401k (even though it wasn’t taken out). You’ll also pay tax on the amount once it is withdrawn from the retirement account. Here’s the explanation from the IRS:

Excess not withdrawn by April 15. If the employee does not take out the excess deferral by April 15, the excess, though taxable in the year of deferral, is not included in the employee’s cost basis in figuring the taxable amount of any eventual benefits or distributions under the plan. In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. Also, if the entire deferral is allowed to stay in the plan, the plan may not be a qualified plan.

Double-taxation is never a good thing. Depending on how much you overcontributed, this could make for some hefty financial consequences.

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