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Level 1

Question

Glitch

4 replies
30 views

Re: Premier. In 2023, my daughter worked approximately 1 month before resigning her long term position with 401k. She later contributed to an IRA. The glitch is: when she updated her W2 info with correct box 12 info, it added her 401k contribution to income (more than 1:1) increasing her taxes by over $1500. Summary: she was under a retirement system for one month and an income investor the rest. Her IRA contribution was accepted as a deduction, but her 401k box 12 items were skewed into more income. How?

Level 15

Did you enter the IRA contribution before the W2? You can't deduct an IRA contribution if you had a 401K account even for 1 day. So she made an excess IRA contribution. It's the IRA that's causing the tax. I think she has to remove the contribution from the IRA account. @dmertz

Level 15

If there is enough earned income, you can still contribute to IRA, but it is not deductible.

you may withdraw it as "excess plus earnings" if carrying a basis in Traditional IRA bothers you.

Level 15

If you want to remove 2023 excess plus earnings you must

do it now before tax day, OR

timely file tax return , or timely request extension, either of which which gives you until Oct 15.

If you file first, you would have to amend.