Good Morning Tax Experts!
I made an excess deferral of $1,200 to my 2023 401K. I just noticed this today as I was doing my return. It is too late to contact with the employer or the 401K administrator to make any changes. My question for the experts is how do I handle this excess deferral in Turbo Tax step by step. Also, once I report this excess deferral and pay taxes on it then I do not need to do anything else (such as informing the employer or the benefits administrator), correct?
Thank you in advance!
You'll need to sign in or create an account to connect with an expert.
Please be aware, if you do not take out the excess amount by April 15th, then you are taxed twice on the excess deferral left in the plan. This happens once when you contribute it (with the steps below) and again when you receive it as a distribution. You can't include the excess amount in the cost of the contract even though you included it in your income.
You should check with your plan administrator if you need to still remove the excess or can leave it in the account since the deadline has passed.
You must include the excess deferral in your wages in the year the excess deferral happened.
Please follow the steps below:
Please see Pub 525 for additional information.
Please can you clarify what you mean by "You can't include the excess amount in the cost of the contract even though you included it in your income"?
This means that the distribution will be fully taxable, you cannot claim that you already paid taxes on this excess amount. Therefore, you are taxed twice on the excess amount.
I see. So only when I take the distribution then it will be taxed again and that could be a day from today or 20 years from today, correct?
Yes, if your plan allows it to stay in the account.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
expat23843
New Member
ayubruin7777
Level 1
johnjames9
Level 2
Best-dad
Level 1
laura0805
New Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.