Retirement contribution limit, including catch up, for 2021 is 26,000$, yet TurboTax indicates I over contributed?

[SkipIntro]

Hi,

Thanks for your help in advance.

I am over 50 and TurboTax is indicating that I over contributed in 2021.

My W2 has my contributions reported in box 12 as:

   Code AA = 14,150

   Code D   =  11,700

   TOTAL     =   25,850

This is under the cap for 2021.

TurboTax indicates an over contribution of 4700$.

I believe the 11,700 reported under Code D is the problem.

All of the contributions were made to my 401(k) some directed to a Roth plan and some to a standard IRA.

I was under the impression that up to 26,000$, no matter what type of program, was deductible as long as contributed to the 401(k).

Is TurboTax handling this wrong?

Did my PEO classify the contributions incorrectly on my W2?

Please help so I can file.

Thanks again!

D

[ThomasM125]

I agree that you should be able to take elective deferrals up to $26,000. There is an income limit to contributing to a ROTH IRA, however. You can't contribute if your income is over $144,000 if a single filer or $214,000 filing married-joint. The deductibility of ROTH IRA's starts to phase out when your income is over $129,000 single or $204,000 married filing joint. So a portion of your ROTH IRA contributions could be over the limit.

[dmertz]

You've mistakenly reported the code-D amount as a traditional IRA contribution under Deductions & Credits.  Remove that entry.  A 401(k) is not an IRA.

[SkipIntro]

Hello and thank you for your reply.

I have a followup question.

My PEO created the W2 and reported the amounts and codes in box 12.

What box 12 code(s) should my 2021 contributions have been reported under?

In 2021 I contributed, via my 401(k),  $11,700 to a pre-tax, standard, IRA and $14,150 to a post-tax ROTH IRA.

While the total, $25,850, is less than the cap for 401(k) contributions

What code(s) should have been used to report these contributions?

Thank you in advance.

[SkipIntro]

Hello and thank you for your reply.

I have a followup question.

If I contribute to a 401(k) what box 12 codes should be used?

In 2021 I contributed, via my 401(k),  $11,700 to a pre-tax, standard, IRA and $14,150 to a post-tax ROTH IRA.

While the total, $25,850, is less than the cap for 401(k) contributions

My PEO reported the ROTH contributions under code AA and the Standard under D.

What code(s) should have been used to report these contributions?

Thank you in advance.

[dmertz]

A 401(k) is not an IRA.

Your W-2 is correct.  Traditional 401(k) elective deferrals are reported with code D in box 12.  Roth contributions to the 401(k) are reported with code AA.

[SkipIntro]

Thanks so much for your prompt and helpful reply.

One last quest for complete clarity.

I over contributed to the IRA by 4700$ and I should withdraw the excess contribution and any income it has earned to avoid the 6% excise tax. I realize I may owe federal income tax on the earnings and state taxes may also apply. Also, since I was funding both a traditional and Roth IRA, the IRS requires that I remove excess contributions from the Roth IRA first.

Do I need a corrected W2 or will I need other documentation from the withdrawal?

Thanks again for all your help.

[dmertz]

What IRA?  The only contributions you mentioned are to a 401(k) through your employer, which is not an IRA.

[pamelaeg]

unless I am reading this thread incorrectly:

1. You contributed to a 401(k)  - part into a pretax 401(k) and part in a Roth 401(k).  If so, the maximum you mentioned is correct and your payroll provider properly reported it with code D for only the pre-tax and code AA for the Roth 401(k).

2.  It sounds like you may have answered a question elsewhere in turbotax about either a Roth or IRA contribution.  You should answer no to all of those, since your contributions were all done through the employer.

3.  If I am correct in 2, then once you delete the yes responses then turbotax should no longer show you overcontributed.

4.  You shouldn't need to do anything else other than correct your answers and do not need to withdraw anything from your accounts.  The recordkeeper (like Schwab, Fidelity, Vanguard, etc.) also could confirm this for you.

Good luck

[Opus 17]

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@SkipIntro wrote:

Thanks so much for your prompt and helpful reply.

One last quest for complete clarity.

I over contributed to the IRA by 4700$ and I should withdraw the excess contribution and any income it has earned to avoid the 6% excise tax. I realize I may owe federal income tax on the earnings and state taxes may also apply. Also, since I was funding both a traditional and Roth IRA, the IRS requires that I remove excess contributions from the Roth IRA first.

Do I need a corrected W2 or will I need other documentation from the withdrawal?

Thanks again for all your help.

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Stop saying IRA.

Workplace plans are NOT IRAs even though they have similar purposes.

If you contributed to a pre-tax 401(k) and an after-tax designated Roth 401(k), those contributions are only reported on your W-2.  You do not enter them again when you are asked about IRA or Roth IRA contributions.

You should be able to contribute up to $26,000 to your workplace plans without issue.  But if you also entered them as IRA contributions that could easily cause an excess contribution problem.  Likewise, if you contributed $26,000 to your workplace plans and also contributed to a private IRA, that can cause problems.

[nongkangma]

I also have a similar question.

Roth 403b contribution, Turbo Tax says overpayment.

Actually, there is special 403 b catch up of $3000  for those have 15 and more years' employment. 

How to deal with this issue? Thanks!

[Opus 17]

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@nongkangma wrote:

I also have a similar question.

Roth 403b contribution, Turbo Tax says overpayment.

Actually, there is special 403 b catch up of $3000  for those have 15 and more years' employment. 

How to deal with this issue? Thanks!

---

Turbotax does not understand the special $3000 catch-up provision for certain 403(b) employees.

The best way to handle this is probably to simply reduce your W-2 entry in box 12 code E or code BB by $3000. This will stop Turbotax from computing the penalty for excess contributions.   I think when the IRS sees the mismatch, they might send a letter, which you could reply to with an explanation that you were eligible for the catch-up but turbotax was penalizing it.

There may be a way to enter the correct amount from your W-2 and then force turbotax to not include the penalty, but this would require using the program installed on your own computer and overriding the program.  Tax returns with overrides can't be e-filed, and you also void the accuracy guarantee.

@macuser_22 Is there another workaround?  I don't think there is, but you might be more familiar. 

[nongkangma]

I'm wondering if Turbo Tax allows users to attach a PDF file so that I can submit the explanation with the e-file.

If so, where I can attach the file?

Thanks!

[Opus 17]

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@nongkangma wrote:

I'm wondering if Turbo Tax allows users to attach a PDF file so that I can submit the explanation with the e-file.

If so, where I can attach the file?

Thanks!

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Not for this situation. 

[nongkangma]

Not only for this situation, wondering if there is any access that users can attach a PDF?