excess 401k contribution

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated) 

Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape

Subject Author Date excess 401k contribution Antony 06-21-2009  Re: excess 401k contribution Alan 06-21-2009  Re: excess 401k contribution Arthur Kamlet 06-21-2009  Re: excess 401k contribution Antony 06-28-2009
Posted by Antony on June 21, 2009, 4:18 pm Please log in for more thread options Hi I had two employers (not simultaneously) in 2008. I contributed to both the 401k plans. The total was in excess of the limit for 2008. When I found out, I informed my second employer's 401k institution sometime in April 2009. They processed my request and sent me a check for the excess and the transaction was made by them on April 15 I have not yet filed my 2008 taxes since I have filed an extension. Here is what the letter from the 401k institution (I guess institution is the wrong word, but the correct word escapes me) says --quote-- The excess deferral amount may be taxable income for 2008. The gains if any are taxable income for 2009. If the excess deferral experiences a decrease in value, the taxable amount is the full deferral amount, unadjusted for loss. This amount will be greater than the amount reported on form 1099-R You will received two form 1099-Rs for this distribution in January 2010. Keep a copy of this letter and the Form 1099-Rs you received for your records. This distribution is not eligible for roll-over into another qualified plan, or any IRA. It is our understanding that this distribution is not subject to 10% early distribution tax --end quote-- The excess amount is about $3100 They gave an additional check for about $15 that I think is the gains. My tax software error check says I have excess contribution. Summary is excess contribution to 401k in 2008 received distribution of excess on April 15 2009 expected to receive 1099-Rs in January 2010 I called IRS and they said I should add the income to the 2008 1040 line 7 and next year when I receive the 1099-Rs those forms would have appropriate information that tells IRS that the income was in prior year and already taxed. Is that good advice? How should I go about doing this - simply add the amount to what the software(I use taxcut) computes for 1040 line 7 for $3100 ? Should I attach a piece of paper explaining anything with my return? -Antony -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Alan on June 21, 2009, 4:51 pm Please log in for more thread options Antony wrote: > Hi > I had two employers (not simultaneously) in 2008. > I contributed to both the 401k plans. > The total was in excess of the limit for 2008. > When I found out, I informed my second employer's 401k > institution sometime in April 2009. > They processed my request and sent me a check for the excess > and the transaction was made by them on April 15 > > I have not yet filed my 2008 taxes since I have filed an extension. > > Here is what the letter from the 401k institution (I guess institution > is the wrong word, but the correct word escapes me) says > > --quote-- > The excess deferral amount may be taxable income for 2008. The gains if > any are taxable income for 2009. > > If the excess deferral experiences a decrease in value, the taxable > amount is the full deferral amount, unadjusted for loss. This amount > will be greater than the amount reported on form 1099-R > > You will received two form 1099-Rs for this distribution in January > 2010. Keep a copy of this letter and the Form 1099-Rs you received for > your records. > > This distribution is not eligible for roll-over into another qualified > plan, or any IRA. > > It is our understanding that this distribution is not subject to 10% > early distribution tax > --end quote-- > > The excess amount is about $3100 > They gave an additional check for about $15 that I think is the gains. > > My tax software error check says I have excess contribution. > > Summary is > excess contribution to 401k in 2008 > received distribution of excess on April 15 2009 > expected to receive 1099-Rs in January 2010 > > I called IRS and they said I should add the income to the 2008 1040 line > 7 and next year when I receive the 1099-Rs those forms would have > appropriate information that tells IRS that the income was in prior year > and already taxed. > > Is that good advice? > How should I go about doing this - > simply add the amount to what the software(I use taxcut) computes for > 1040 line 7 for $3100 ? > > Should I attach a piece of paper explaining anything with my return? > > -Antony > The IRS information is correct. The proper method is to add the excess amount to Line 7 (Wages) on your 2008 tax return. Some tax preparers prefer to add it to Line 21 because their software allows them to make an entry for Line 21 which will print on the 1040 and get e-filed. In 2009, you report the total amount received ($3115) as a gross pension distribution and you report as taxable, the $15 (your earnings). The $15 is also subject to the 10% ($2) early withdrawal penalty if you had not attained age 59 1/2. The 1099-R for the $3100 should have a Code P in Box 7. This signifies it was taxable in 2008. The 1099-R for the $15 should have a Code 8 in Box 7. This signifies it is taxable in 2009. If you were not yet age 59 1/2, there should also be a Code 1 to go with the Code 8 in Box 7. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on June 21, 2009, 4:56 pm Please log in for more thread options >Hi >I had two employers (not simultaneously) in 2008. >I contributed to both the 401k plans. >The total was in excess of the limit for 2008. >When I found out, I informed my second employer's 401k >institution sometime in April 2009. >They processed my request and sent me a check for the excess >and the transaction was made by them on April 15 > >I have not yet filed my 2008 taxes since I have filed an extension. > >Here is what the letter from the 401k institution (I guess institution >is the wrong word, but the >correct word escapes me) says > >--quote-- >The excess deferral amount may be taxable income for 2008. The gains if >any are taxable income for 2009. > >If the excess deferral experiences a decrease in value, the taxable >amount is the full deferral >amount, unadjusted for loss. This amount will be greater than the amount >reported on form 1099-R > >You will received two form 1099-Rs for this distribution in January >2010. Keep a copy of this letter >and the Form 1099-Rs you received for your records. > >This distribution is not eligible for roll-over into another qualified >plan, or any IRA. > >It is our understanding that this distribution is not subject to 10% >early distribution tax >--end quote-- > >The excess amount is about $3100 >They gave an additional check for about $15 that I think is the gains. > >My tax software error check says I have excess contribution. > >Summary is >excess contribution to 401k in 2008 >received distribution of excess on April 15 2009 >expected to receive 1099-Rs in January 2010 > >I called IRS and they said I should add the income to the 2008 1040 line >7 and next year when I >receive the 1099-Rs those forms would have appropriate information that >tells IRS that the income >was in prior year and already taxed. Well, how about that? The IRS got it right. Add the excess amount to 2008 line 7 and feel free to attach an explanation or file form 4275 if you prefer. >Is that good advice? >How should I go about doing this - > simply add the amount to what the software(I use taxcut) computes for >1040 line 7 for $3100 ? > >Should I attach a piece of paper explaining anything with my return? -- ArtKamlet at a o l dot c o m Columbus OH K2PZH -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Antony on June 28, 2009, 10:00 pm Please log in for more thread options Antony wrote: > Hi > I had two employers (not simultaneously) in 2008. > I contributed to both the 401k plans. > The total was in excess of the limit for 2008. > When I found out, I informed my second employer's 401k > institution sometime in April 2009. > ..................... computes for > 1040 line 7 for $3100 ? > > Should I attach a piece of paper explaining anything with my return? > > -Antony > Thank you Alan and Arthur for your replies. -Antony -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted 401(K) Excess Contribution January 26, 2007, 11:52 pm excess 401(k) contribution April 3, 2007, 6:46 pm excess 401(k) contribution & W-2 April 16, 2007, 12:09 am Excess IRA contribution January 28, 2008, 8:55 pm excess contribution to 457 February 1, 2008, 11:25 am Refund of "excess" 401(k) contribution due to HCE tag January 25, 2007, 2:43 am SIMPLE IRA - Possible excess contribution? February 2, 2007, 2:10 am Best Method for Return of Simple IRA Excess Contribution February 27, 2008, 4:59 pm Paying Penalty for Excess Roth IRA Contribution April 12, 2006, 11:09 pm Question regarding penalty associated with excess Roth IRA contribution April 14, 2006, 3:45 am