Client changed jobs, contributed to 401(k)s at both, and contributed too much. I understand that he has to go to one of his employers and have them remove the excess plus earnings ASAP and that he'll get a 1099-R next year with a code P for the excess and would amend 2006 and deal with the earnings removed in 2007 on his 2007 return. However, since we haven't filed his return yet (I uncovered this entering his W-2s) is there a way to deal with the "wage" portion right now on his 2006 return and not amend AFTER a 1099-R is issued next year? He's paid SS and Medicare on that amount anyway, so can it be put on Line 21 as "excess 401(k) contribution" and all is well in the land? Or, is that too simple? What am I missing? Or, am I mixing this situation up with when a highly-compensated employee gets a return of his retirement contribution from his company? Sleep deprivation ruins the brain.
-
-
401(k)
Of course, it's a 401(k) plan... -
Not Line 21
IRS will advise you to add it to Box 1 one on the W-2 in which excess contribution occurred.
It will not agree with their copy but that is ok. When IRS receives 1099R next year with Code P they then match it up to the previous year W-2. The excess contribution with the earning thereon must be withdrawn.Comment
-
Thank you very much
Thank you, Solomon.Comment
-
Lion
I had one of these recently and called 401k section of IRS and that was told to do. My first instinct was Line 21 also but that is incorrect.Comment
Comment