SIMPLE IRA excess contribution question

[bk2007]

My husband operates a business as a sole proprietorship using Schedule C. He has two employees for which he contributes the employees 3% deferral as well as a 3% match monthly.  Since he doesn't take a paycheck, at the end of the year, he puts in his personal contribution (employee deferral)  and 3% of his income (employer match) before we file our taxes.

However, this year we had a death in our family at the end of January, as a result, we took the checks to the investment firm on February 1, not realizing we missed the January 30 deadline for his deferral contribution for 2023. As a result, when they tried to deposit the $10,000 "employee deferral" check, the system said employee contributions not allowed for 2023 so they deposited that amount as an employer contribution. That amount would've been far in excess of the 3% allowed to be allocated as "employer". Therefore, they withdrew the money (the original $10,000 along with $300 in earnings) as excess contributions.  My question is this: I'm not sure how to reflect this on my 2023 taxes or is this something that will be reported on my 2024 taxes?  Any advice is appreciated.

[dmertz]

Do not enter any self-employed SIMPLE IRA contributions into 2023 TurboTax.  (With no elective deferral, there can be no employer matching contribution.)

The $300 will be taxable on the 2024 tax return when reported on a code-8 2024 Form 1099-R.

[bk2007]

Thank you for your reply. I hope I’m explaining this where I make sense.

Tell me if I’m wrong about this: because he does not get a paycheck, I was under the impression that he could make a contribution before April 15 (for prior year) for employer contribution and January 30 (for prior year) for personal “employee”  contribution.

Before this additional check of $10k (which was intended for employee contribution and was wrongly deposited as employer contribution) there was a small prior deposit  made as employee contribution and another deposit of 3% of his schedule c income which was applied as employer match. The employee contribution was greater than the employer match so I think that’s all ok? Therefore, I’ve reported that as such on our income taxes. Am I wrong?

The additional $10k was because we decided after doing our taxes that we had the money to make a larger employee contribution. If I had it in by January 30, would that have been acceptable to do?

[dmertz]

https://www.irs.gov/retirement-plans/simple-ira-tips-for-the-sole-proprietor#:~:text=When%20must%20I....