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Over contributed to 401k

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  • Over contributed to 401k

    hey so I finished residency in June and had placed like 1500 that year into a 403b.  I started my big boy job in August and starting contributing to the 401k on a Roth basis.   Unfortunately, they only allowed me to designate a percentage of my income to the 401k each month, not a fixed amount, and I'm rvu based so months were very variable.  I ended up maxing out my Roth 401k at 18000.  How is this going to effect my taxes?  Any advice?

     

    thanks

  • #2
    You have to remove the excess employee deferral and earnings. Normally, you would do this through your current place of employment.

    You will need to contact your employer or 401k plan administrator. This is a fairly common occurrence. They will know exactly what to do. Some will prefer that you wait until you have both W-2 forms in hand. They only want to do this once.

    Hopefully, they will also have a nice handout on how to file this on your taxes. It is not difficult, easier once you already know how to do it. The bottom line is that the excess deferral will be subject to ordinary income tax (depending on whether it was a pre-tax or post-tax Roth deferral) on your 2016 return and since it is now 2017, the earnings will be taxed as ordinary income on your 2017 return.

    I give you the option that you might try removing it from your earlier employer. There is no IRS requirement that they do so and many administrators will tell you to do it from your current employer. However, you probably want to try, given that you probably want that small amount of funds out of the other plan anyway. Removing the excess deferral and earnings from there saves you from having to roll it over.

    Although, you might want to factor in whether you want to remove a pre-tax or post-tax deferral. That is assuming that the 403b contribution was pre-tax?

     

     

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    • #3
      Yeah 403 was pretax.  Thanks!

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      • #4
        you need to remove the excess. probably easier from your current plan. HR should know how to deal with this, but likely you will have a small headache to deal with.

        the other question is, is a r401k a better choice vs traditional....

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