I over-contributed to my Self-Employed 401(k) (as employee deferral, not as employer, if it even matters) in 2021. Gross 1099 income from that self-employment was over $19,500, so I contributed the full $19,500, except my contribution limit was lower (~$18,000) because "self-employed income" is lower than what the 1099 shows. I realized this mistake after the mid-April deadline to remove the excess deferral.
Even before I correct this, I understand the amount of the excess deferral is taxable in 2021, because TurboTax limits my deduction to the ~$18,000 amount (on line 16 of Schedule 1). OK, so that's the first taxation of that excess deferral - cool.
And then, because I am after the mid-April deadline, the deferral will be taxed again when I remove it. I am 49 (under age 59.5), so if I remove the excess now, then I'll also likely pay the 10% early withdrawal penalty.
Is the next step to request to withdraw the difference, plus proportional earnings attributable to the excess deferral, simply as "early distribution"? It's actually losses in the account, not profits - I'll just withdraw the exact difference to be safe, I'm thinking.
Then when I file my 2022 taxes, the withdrawal will be taxed again, and that's the end of the resolution of this issue, right?
