Did you accidentally over-contribute to your 401k retirement plan? Here is how to fix it.

Contact your 401k plan administrator as soon as possible so they can take corrective actions by returning the excess amount. Also let your employer know so they can amend your W-2. You will then use the newly issued W-2C to file/amend your tax returns.

Some of the most common questions we get:

How do I know if I over-contributed to the 401k retirement plan? 

Check your W-2, paystubs, and payroll records to calculate the total contribution made for the year. The maximum 401k contribution per taxpayer is $20,500 in 2022; $19,500 in 2020-2021; $19,000 in 2019. 

What if my employer couldn’t issue a W-2C on time? 

You should still self-correct your tax returns by adding the excess contribution to your taxable income under the year of contribution. 

How do I fix the excess contribution? 

Withdraw the excess contribution as soon as you find out, and do that by the due date of the tax return (usually April 15th following the year of contribution). For the purpose of determining the due date, an extension would not be considered. 

What if I found out the excess contribution after the due date of tax returns? 

You must know the tax implications in this case. You would report the income under the year of contribution AND distribution. Yes, unfortunately you are paying tax twice here. In addition, you must calculate any earnings associated with the excess contribution and report them in the year of distribution.

Will I be subject to penalties? 

If you were unable to remove the excess contribution by the due date of tax returns, then you will have penalties.

If you would like to learn more about the tax implications, or need help with amending your tax returns. We are here to assist and get you back on track. Simply reach out to us using the contact form below and we will guide you through the process.