Excess 401K contribution because of job changes in 2018?

[urlreader]

I changed my job in 04/2018, and totally forgot the 401K thing until now.

When I was with my previous work, I contribute about $7000 (prior to 04/2018). Then with my current work (still working for the same company now), from 04/2018-12/2018, I contribute about $17000. So, I made excess contrition about $5000. I found this until now (2022).

My current 401K is with TROWEPrice, they said they could not release the excess fund since it is after 04/2019. And according to plan guide line, I have to wait until 60 years old or change the job, then they allow withdraw. And because of this, I can not get any new form from my current company for tax purpose to fix this.

What can I do to fix this now? Really there is no way?

I understand there will be penality, etc. since it was about 4 years ago. But it has to have a solution for this. or, I have to change the job?

I tried to call IRS, but in the waiting line forever, never had someone pickup the phone.

Thanks

[Critter-3]

Sorry but there is NOTHING you can do about this issue at this late date ... when the excess contribution was made you should have been taxed on the excess back on the 2018 return  AND   you will also be taxed on the distribution when it is made later ...  effectively you are taxed on that excess twice because you did not get this corrected timely.

[urlreader]

I understand I have to be taxed twice. My question is: how can I report tax and withdraw excess 401K now ?

TROWEPrice does not release the excess amount, then I can not have the new 1099 (with correction), then can not report changes.

Does this mean I have to wait for changing the job or 60 years old (which is far away in the future) to fix this?

I just think my case can not be the unique case, somebody has to have the same issue before.

Thanks

[urlreader]

I mean without releasing the excess, how can I report the tax change in 2018 in this case? any forms?

[Opus 17]

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@urlreader wrote:

I mean without releasing the excess, how can I report the tax change in 2018 in this case? any forms?

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You can't withdraw the excess.  It's part of your retirement and that can't be changed.

If you paid income tax on the excess contributions on your 2018 tax return, you are done.  There is nothing more to do.  The excess is in your account and will be taxed again when you withdraw it.  If you withdraw before age 59-1/2, you will also pay a 10% penalty. 

If your contributions were properly reported on your W-2 from both jobs, and if you used tax software to file your return, the payment of tax on the excess contribution should have been automatic.  You would need to review your 2018 tax return and W-2s to confirm this, do you have copies?

If you filed by hand and did not report the excess, you have two options.  Since it is past the 3 year statute of limitations, you can ignore the problem and figure that the IRS didn't catch you and now its too late.  Or if you want to pay the tax anyway, you will need to tell us how you filed in 2018 so we can advise you on filing an amended return.

But, you probably paid the tax in 2018, check your tax return.  See if your line 1 taxable wages are equal to the box 1 wages in both W-2s PLUS the excess 401k amount, or if line 1 is only the total of your W-2s. 

[urlreader]

Hi,

I always used TurboxTax to report the tax. However, the total amount on two W2 is the same as line 1 on 1040, which does not include the excess 401K amount.

I want to report the tax anyway. What I should do now?

thanks

[Opus 17]

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@urlreader wrote:

Hi,

I always used TurboxTax to report the tax. However, the total amount on two W2 is the same as line 1 on 1040, which does not include the excess 401K amount.

I want to report the tax anyway. What I should do now?

thanks

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This is unusual.  Let's check your 2018 W-2s.  What are the items in box 12?  We are specifically looking for code D and code AA.

[Opus 17]

And how old were you in 2018?

[urlreader]

i checked again, 2 W2 filled in 2019 Turbox tax correctly, but for some reasons, seems it does not catch the excess 401K contribution.

[urlreader]

luckily, I have all records.

on these 2 W2, no code AA, both have code D, one is $17000, one is $7300.

they both have code DD, and 1 W2 also has code C.

and I was 40 years old in 2018.

[Opus 17]

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@urlreader wrote:

luckily, I have all records.

on these 2 W2, no code AA, both have code D, one is $17000, one is $7300.

they both have code DD, and 1 W2 also has code C.

and I was 40 years old in 2018.

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Ok, the deferral limit in 2018 was $18,500 so you do have an excess of $5800.  What should have happened is Turbotax should have popped up a warning saying, "you have excess deferral, since it will be taxed anyway you might want to remove it from the 401k" and the excess should have been added to your taxable wages.  I have no idea why turbotax would not put the income on your return.

I can test a copy of TT 2019 at home later to verify what the behavior of the program is supposed to be, but not now.

Now in point of fact, the statute of limitations is 3 years from the April 15 deadline or the date you actually filed, whichever is later.  That would have been April 15, 2022.  If the IRS didn't catch your mistake, it is too late for them to make you fix it.

If you still want to pay your tax, you would need a copy of Turbotax 2018 installed on your computer, and you need your original 2018 data file, and you prepare an amended return.  Here are the general instructions. https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...

Expect the IRS to come back and hit you with interest and a late payment penalty. The penalty is 0.5% per month and the interest is variable, about 4% per year, applied to the entire balance (tax, penalty and prior interest).  You can apply for a waiver of the penalty but the interest can't be waived by law.   You can also try and file a claim with the Turbotax Accuracy Guarantee.  If you accurately entered your W-2s with an excess deferral and Turbotax did not report it, that's a program error.  You always owe your own correct tax but Turbotax is supposed to cover penalties and interest for program errors.  You can't apply for the guarantee until you actually get the bill for penalties and interest.

[urlreader]

thank you very much, really appreciate the help.

I want to amend the return of 2018 which I filed in April 2019. In the link:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...

it says:

You have three years from the date you filed your return or two years after you paid the tax due (whichever is later) to file an amendment.

so the deadline passed. does it mean I can not submit amend anymore? what I should do now?

BTW, I do have other income in 2018, but they are not W2, and no 401K related, could it because of this so turbotax did not report the excess contribution?

Thanks 

[urlreader]

BTW, if you test TT2019 for this, please let me know when it pops that message? I still have the 2019 version installed, I went through error check, and did not see any.

Thanks

[Opus 17]

@urlreader 

The IRS will always accept an amended return to pay tax you owe.  The 3 year deadline is to claim an additional refund, if the change creates a refund.  (But as noted, you are also past the statute of limitations.)

There are different contribution limits for a SIMPLE IRA, but that's something you have if you are self-employed, and is reported differently in Turbotax.  The excess deferrals (from adding up the Code D amounts) should still have triggered the excess contribution situation even if you have other income. 

[urlreader]

@Opus 17 if it triggered the overlimit, it should automatically plus the excess contribution to the 1040 line 1 for taxable income correct (although it did not in my case).