red
.Pre-tax: $16,400.00
Roth: $4,100.00
(Total: $20,500.0)
Employer Match: just under $10,000
After-Tax (Backdoor): approx $5,000
Pre-Tax: $632.70
Roth: $12,925.02
Q1.a
:( My understanding that the amount in the second 401k that counts towards the $20,500 IRS limit is $632.70 + $12,925.02 = $13,557.72, and the employer-match and backdoor contributions are not relevant,correct?
Q2.b
) Since the first 401k was already maxed out, the $13,557.72 is exactly the overall over-contributed amount in 2022,correct?
Q3
), if the money is withdrawn before the tax deadline, then I can avoid double taxation. In that case the money would need to be taxed as 2022 W2 income, and the early withdrawal penalty would be avoided.Correct?
Q4
) My next step is tounderstand what the applicable tax deadline is
: Several online forums imply that it has already passed on April/18. However, this IRS publication appears to say that the upcoming extended tax deadline is applicable (see section "Excess Contributions Withdrawn by Due Date of Return"). (I have filed for the tax extension.)Q5.a
) If it passed, I will need to understand the consequences of withdrawing the over-contributed amount now vs. later.Q5.b
) If there is still time, I will need to understand how I can compute the exact amount to withdraw to correctly account for capital gains (they are actually small capital losses this year).The way section 402A(c)(2) of the tax code is written, the excess of $13,557.72 is deemed to be in the designated Roth accounts. This means that $632.70 of Roth IRA contributions at the first employer and all of the Roth contributions at the second employer are excess contributions.
https://www.law.cornell.edu/uscode/text/26/402A
The tax code specifies the deadline to receive any corrective distributions of excess employee deferrals or Roth contributions from a 401(k) as being April 15 of the following year, not the tax deadline, although they are generally the same (except when the tax deadline gets extended). The reference in IRS Pub 590-A applies to IRAs, not to 401(k)s. See IRS Pub 560 for rules for qualified retirement plans.
The consequence is that distributions from the designated Roth accounts are taxable to the extent of the excess contributions and attributable earnings until these amounts are fully distributed. The result is double taxation of the excess and single taxation of the earnings. You won't be able to take distributions from the plan at your new employer until you either separate from service or reach age 59½. You can take distributions from the designated Roth account at the first employer since you have separated from service, but it would be as a regular distribution and, with the excess and attributable earnings being taxable, they would also be subject to a 10% early-distribution penalty. It's likely that the first employer's plan would not report such a distribution as taxable, so you would probably have to file a substitute Form 1099-R to report the distribution as taxable.
The way section 402A(c)(2) of the tax code is written, the excess of $13,557.72 is deemed to be in the designated Roth accounts. This means that $632.70 of Roth IRA contributions at the first employer and all of the Roth contributions at the second employer are excess contributions.
https://www.law.cornell.edu/uscode/text/26/402A
The tax code specifies the deadline to receive any corrective distributions of excess employee deferrals or Roth contributions from a 401(k) as being April 15 of the following year, not the tax deadline, although they are generally the same (except when the tax deadline gets extended). The reference in IRS Pub 590-A applies to IRAs, not to 401(k)s. See IRS Pub 560 for rules for qualified retirement plans.
The consequence is that distributions from the designated Roth accounts are taxable to the extent of the excess contributions and attributable earnings until these amounts are fully distributed. The result is double taxation of the excess and single taxation of the earnings. You won't be able to take distributions from the plan at your new employer until you either separate from service or reach age 59½. You can take distributions from the designated Roth account at the first employer since you have separated from service, but it would be as a regular distribution and, with the excess and attributable earnings being taxable, they would also be subject to a 10% early-distribution penalty. It's likely that the first employer's plan would not report such a distribution as taxable, so you would probably have to file a substitute Form 1099-R to report the distribution as taxable.