Return of Excess Question
Hello,
A client called in and the employer miscalculated the monthly contributions for SIMPLE IRA from March 2022 through December 2022.
The monthly contribution should have been $162.50 so overall they need to remove $1,000 of employer contributions.
Can we please clarify the following:
if the computation period would start on 3/15/2022 prior to the first Contribution of $262.50
OR
if the computation period would start on 9/15/2022 prior to the last 4 Contributions of $262.50 since that created the excess contribution?
Any feedback would be greatly appreciated. Thank you,
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-04 19:08
Use 3/15 because this excess amount is not related to the overall SIMPLE IRA contribution limit, but it’s an excess salary reduction contribution from the affected paychecks. Given market perforance over this period, there is likely to be a loss rather than a gain. Since client’s W-2 Box 1 for 2022 excludes these excess contributions, the 1099R reporting the excess distribution for 2023 should include the full amount distributed as taxable in Box 2a.