ratherbereading Posted April 21, 2017 Posted April 21, 2017 The 2 owners in a plan over-contributed to their 401k accounts by $465 each for plan year ending 12/31/2016 even though their W2s state they contributed $18,000. There were 53 payrolls in 2016. The refund is being made after 4/15. Is the Distribution Code a P for Prior Year, or 8 for Current Year? They are not 50 or older. Thanks is advance! 4 out of 3 people struggle with math
RatherBeGolfing Posted April 21, 2017 Posted April 21, 2017 Code 8 - taxable in current year. (excess plus earnings) The also need to amend their W-2's to show $18,465 as deferred (but only exclude $18,000 from income).
Bird Posted April 21, 2017 Posted April 21, 2017 Quote The also need to amend their W-2's to show $18,465 as deferred (but only exclude $18,000 from income). I agree, if events occurred exactly as described. But I'd want to know why/how the W-2s show only $18,000 before doing anything; something about this sounds screwy. hr for me 1 Ed Snyder
BG5150 Posted April 21, 2017 Posted April 21, 2017 Was $465 the normal contribution for the recent payrolls? Maybe they capped out on week 52, but someone just assumed the money was deducted and passed it along to the r/k because that was happening in the weeks previously. If so, it's not a 402(g) excess, but an excess allocation. See EPCRS for correction. (I agree with Bird: W2's generally get generated through the payroll software, no? So how could 18,465 be withheld and only 18,000 reported?) 401king 1 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
RatherBeGolfing Posted April 21, 2017 Posted April 21, 2017 7 minutes ago, BG5150 said: (I agree with Bird: W2's generally get generated through the payroll software, no? So how could 18,465 be withheld and only 18,000 reported?) Unfortunately, I see this all too often with smaller companies who use a small accounting firm to do the W-2. Those W-2's are not calculated by software, they are manually entered and most likely the put $18,000 because it is the limit rather than the true deferral This is the same reason I just had to tell a client to go back to their CPA to redo the W-2's because they did not reduce Box 1 income by the pre tax deferrals...
BG5150 Posted April 21, 2017 Posted April 21, 2017 Bottom line, though: find out what happened before you start amending W2's and making people re-file taxes. K2retire 1 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
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