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Babcock270

Over-contributed

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Hello.

 

I just found my 403(b) account was over-contributed in 2003 from my salary by around $2,000 over the $13,000 limit of IRS. I believe it was my employer's fault.

 

My goal is to contribute in full (i.e., the IRS max. limit) every year. Can I simply ask my employer to deduct less in 2004 so as to make up the excessive contribution in 2003? This way I will pay tax for the over-contribution of 2003 in 2004.

 

Is this a normal practice acceptable to IRS? Any other solutions?

 

Thanks for your attention.

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While your proposed solution to the problem seems logical, we must be careful not to confuse logic with the requirements of the Internal Revenue Code.

 

If you made an excessive elective deferral for 2003, you have to ask the plan to distribute that excess, plus earnings on the excess, before April 15, 2004. The excess contribution will have to be included in income for 2003, but the earnings on the excess will be included in income for 2004.

 

The best thing to do is check with your employer or the product provider. Most companies that provide 403(b) products know how to fix the problem. All you need to do is contact them and tell them that you over contributed for 2003 and tell them the amount. Most will send a 1099 for 2003 indicating the amount to be included in income. If they don't, you still need to include it on your income tax return.

 

It would also be best to take care of this as soon as possible.

 

Hope this helps. Good luck!

 

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