2 jobs, 2 401(K) plans

[danthetaxman]

A client, 35 years old had two jobs in 2020 (unrelated employers). Both jobs offer 401(K) plans.  He deferred $19,500 at job #1 and $ 4,000 at job #2. Is that legal? Does ProSeries software give an error message about this situation?

[qbteachmt]

The IRS knows:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sha...

"Generally, you aggregate all elective deferrals you made to all plans in which you participate to determine if you have exceeded these limits. If a plan participant’s elective deferrals are more than the annual limit, find out how you can correct this plan mistake."

Is the person 50 or older?

"Highlights of changes for 2020

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500."

[danthetaxman]

I said he was 35. What is this "Level up" at the end?

[Just-Lisa-Now- · Accepted solution]

Level up is a signature line, ignore it.
So yes, he has excess contributions, Im honestly not sure how to deal with this situation though, sorry.

You may want to start a new post asking how to rectify excess 401k contributions through payroll.

[sjrcpa]

He needs to withdraw the excess, plus earnings, from one of the plans. I think it needs to be done by 3/15/21. 4/15/21 per qbteach's link.

The excess is taxable as wages in 2020.

[qbteachmt]

"What is this "Level up" at the end?"

As you help in this peer community, you will move up in levels. Intuit has turned this into a game, in other words.

[qbteachmt]

He need to contact the plan administrator at whichever job he wants to have the excess returned to him, and they will compute the amount of earnings. You enter that in the 2020 tax return because it is "for that year" and not "in 2021", even though he gets a 1099-R for 2021. The code on that 1099-R will show it is from the prior year.

I'm pretty sure you have until the tax return filing due date, but I can't recall if that includes Extension.

I like these articles:

https://www.investopedia.com/ask/answers/158.asp