Excess 401k contributions between two W-2s
A client deferred $8,000 into his 401k before leaving his employer. Then he contributed $17,000 to his new 401k with his new employer. All this happened in 2012, and he is 40 years old. So he contributed $8,000 too much for 2012. What must he do, and must I do anything in preparing his 2012 form 1040?
Permalink Submitted by mk foss on Mon, 2013-04-01 22:35
He must notify the new employer so that the $8,000 is taken out of the plan by April 15, 2013. The $8,000 will be included on the 2012 return as additional W-2 income.
Permalink Submitted by Joe Messina on Mon, 2013-04-01 23:22
Would I show it on line 21 as “Other income” with an explanation? I don’t know how I would otherwise show it on line 7 using efile if there is no actual W-2 form for the $8,000 right now. Correct?
Permalink Submitted by Alan - IRA critic on Tue, 2013-04-02 00:04
I expect that if the Box 12 deferrals exceed the maximum, the tax program will automatically add the excess to line 7 wages. Line 7 is where it must show, and that should be easy to check out. I would advise the client to request the corrective distribution immediately, but also to tell them if they cannot distribute it by 4/15, not to distribute it at all. If they distribute it after 4/15 it will be taxable twice, both in 2012 and 2013. The 2012 line 7 increase applies no matter what he does, but if he cannot get the distribution by 4/15 he should just leave it in the plan. Any earnings distributed with the corrective distribution are taxable in 2013, not 2012. The earnings will be added to line 7 on his 2013 return.