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403b excess deferral refund from Roth or traditional account


Guest kathar7

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I'm trying to figure out whether it's better for an employee to get a 403b excess deferral refund from (a) a Roth or (b) a traditional account where (1) the refund occurs after 4/15 of the year following the year the excess contribution was made, (2) the total contribution was split between both kinds of account, and (3) the excess contribution occurred with a single employer. If the refund is from the traditional account, the employee adds that amount to reportable income for the year in which the contribution was made, and must also report the amount as income in the year the distribution occurs. If the refund is from the Roth, the reportable income in the year in which the contribution was made already includes the excess contribution, and the employee must report the amount as income again in the year the distribution occurs. In both cases, the amount is taxed twice, but where the refund is from the traditional account, the total reportable income seems to be higher. Is that right? Is there a difference in what penalties might apply, or any other difference?

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