Small over-contribution to 401k. Can I do nothing about it?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Miguelito
Posts: 283
Joined: Thu Feb 27, 2014 1:21 pm

Small over-contribution to 401k. Can I do nothing about it?

Post by Miguelito » Thu Jul 18, 2019 9:38 am

I switched jobs last year. Fully aware of the fact that I could over-contribute to my 401k if I did not watch it, I planned and adjusted my percentage contributions with my new employer so that I would be at or slightly under the 19k limit for the year between both employers. Well, despite assurances from payroll as to when the change would take place, it took one pay period longer to kick in and as a result I over-contributed to my 401k by only about $50 or so. Turbo tax gave convoluted instructions on what to do, but they essentially said to tell the plan administrator about the over-contribution, ideally before 4/15. I did so. I even pinged them about it, but nothing was done.

I'm perfectly happy being double-taxed or whatever since it's such a small amount and it's not worth my time to chase after it, but is it ok to just let it go, or is this small amount going to grow like a cancer and cause issues down the road?

From what I read at the time, that $50 will show up again in 2019 as taxable income or whatever. I'm fine with that if that is the end of it.

I'd welcome any guidance on this.

jacoavlu
Posts: 762
Joined: Sun Jan 06, 2013 12:06 pm

Re: Small over-contribution to 401k. Can I do nothing about it?

Post by jacoavlu » Thu Jul 18, 2019 6:57 pm

So what did Turbotax do? Did you end up with a deduction of $19,000, or $19,050?

Because the funds were not removed by 4/15, I believe they can no longer be removed.

If you had a deduction of $19,050 then you need to amend your 2018 tax return to show a deduction of $19,000. Then yes you'll eventually be taxed a second time when that $50 comes out in retirement. But I do not believe it needs to be immediately distributed with penalty and taxed to you in 2019.

This recent thread may help you
https://www.whitecoatinvestor.com/forum ... -and-403b/

Also hopefully someone smarter than me will chime in.

Topic Author
Miguelito
Posts: 283
Joined: Thu Feb 27, 2014 1:21 pm

Re: Small over-contribution to 401k. Can I do nothing about it?

Post by Miguelito » Fri Jul 19, 2019 10:00 am

Thanks. Frankly I do not recall what Turbo Tax did, but I think it claimed the full 19,050. I'll check tonight at home.

Post Reply