Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
09-04-2017 12:21 AM
Before we filed the 2016 taxes we thought our retirement contributions was 18k for our combined 401k and 457 plans. Since the combined total was over 18k we got the "Excess Retirement Contribution" message from H&RBlock tax application which then treated the excess as income and resulted in tax on that excess income. Now a few months after we filed, we reclarified the limits one more time with our Retirement Plan Administrators to make sure we don't go over again in our 2017 taxes. This is when we discovered we actually misunderstood the original explanation. It turns out each plan had its own 18k limit and we, therefore, overpaid in taxes as a result.
What can we do to correct this so that we can get back the taxes we overpaid?
09-04-2017 08:22 PM
If you did in fact pay extra taxes then all you need to do is file an amended tax return to correct the error. So long as it's within three years of the original due date for the return you'll get a refund of the excess amount.
The question that we need to answer though is whether or not an error was actually made. There are limits on 401(K) plans that you may not have known about and weren't told about, so let's eliminate that possibility first if we can. The overall limit for 401(K) elective deferral contributions (and this one is what catches people the most) is $54,000 in total between all of your accounts or an amount equal to your earned income, whichever is less. If your earned (wage & salary) income is less than your total contribution amount then that could be how you were over the limit.
You are correct that the limit for 401(K) elective deferral contributions is $18,000 per account.
For a 457(B) plan the annual limit for elective deferral contributions is either $18,000 or an amount equal to your earned income, whichever is less. The annual limit on 457(B) plans is significantly lower than a 401(K), so that is another possible reason why you paid tax on some of the distribution.
How much is your wage & salary income? How much did you contribute to each plan? With the answers to these two questions I'll be able to figure out if you were actually within the limits or not.
Senior Tax Advisor (Tampa, FL)