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mckennaptr

What Can Be Done?

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Guest Joel

Does the $1500 represent the amount in excess of the statutory maximum for 2003 or does it represent simply $1500 more than you personally desired to contribute for 2003?

 

Joel

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Does the $1500 represent the amount in excess of the statutory maximum for 2003 or does it represent simply $1500 more than you personally desired to contribute for 2003?

 

Joel

the $1500 represent the amount in excess of the statutory maximum for 2003

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I assume that the $1,500 represents an elective deferral (salary reduction) contribution made in excess of the $12,000 limit ($14,000 for those age 50 or older) that was in effect during 2003. If so, there's a simple procedure for correcting the problem.

 

Contact the product provider and tell them that you made an excessive elective deferral for 2003. When given the amount, they will distribute the excess, along with earnings attributable to the excess. You will have to include the excess contribution in your gross income for 2003. However, the earnings that are distributed will be included in your income in the year actually distributed, which is 2004. But, since the contributions are recent, the income attributable to them is likely a small amount.

 

Here's an important word of advice: Make sure you take care of this before April 15. Unless distributed before April 15, the corrective procedures described above are not available. You'll still have to include the excess in gross income for 2003, but since the funds cannot be distributed, you won't be able to get them out of the 403(b) account. Therefore, when ultimately distributed at retirement, they will be taxed again.

 

The safest thing you can do is to take care of this matter today!!

 

Hope this helps.

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