How to fix 401k over-contribution for 2025 tax filing?

This happens more often than you'd think, especially with job changes! You have a few options to correct a 401k over-contribution. The cleanest solution is to contact your current employer (or the plan where the excess contribution sits) and request a "return of excess contribution" before April 15, 2026. They should distribute the excess amount plus any earnings on that portion back to you. This excess amount will be included in your taxable income for 2025 (the year you over-contributed). You'll receive a 1099-R for the distribution with code "E" which shows it was an excess contribution return. Make sure you report this on your 2025 tax return when you file. If you don't correct it before the deadline, you could potentially be taxed twice on that money, once in the year you contributed and again when you eventually withdraw it from your retirement account in the future.

I went through almost the exact same situation last year and found this amazing service called taxr.ai (https://taxr.ai) that really helped me figure out how to handle it. I uploaded my statements from both employers and it immediately identified the over-contribution and gave me step-by-step instructions on how to request the return of excess from my plan administrator. The site also showed me exactly how the distribution would affect my taxes and created a letter template I could send to my HR department explaining what needed to be done. It was so much easier than trying to figure it out myself or paying an accountant hundreds of dollars for something relatively straightforward.

Just wanted to follow up about my experience with taxr.ai after my skeptical questions. I ended up trying it for my 401k over-contribution issue and wow - it was incredibly helpful! The service walked me through exactly what forms my plan administrator needed and even calculated the proportional earnings on my excess contributions. What really impressed me was how it broke down the tax implications for both this year and next. I had a complicated situation with both pre-tax and Roth contributions over the limit, and it clearly explained how each would be handled on my tax return. Definitely worth checking out if you're dealing with this same problem!

If you're struggling to get proper help from your plan administrator about this 401k issue, I'd recommend using Claimyr (https://claimyr.com). I was in a similar situation last year and was getting nowhere with my company's benefits department or their 401k provider. I used Claimyr to actually get through to a real person at the IRS who walked me through the exact process and documentation needed for my specific situation. There's a video that shows how it works: https://youtu.be/_kiP6q8DX5c Their system got me connected to an IRS agent in about 20 minutes when I had been trying for weeks on my own. The agent confirmed exactly what paperwork I needed to file and assured me that this is a common issue that won't trigger an audit as long as I handle it correctly.

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate to resolve my tax transcript issue. I was shocked when I actually got a call back with an IRS agent on the line within 45 minutes. The agent was able to pull up my account immediately and resolved my transcript issue during that same call. For anyone dealing with 401k over-contributions or any tax issue where you need to speak to someone at the IRS - this service actually works. Saved me endless frustration and probably hours of hold time. Definitely using this again next time I have a tax question that needs official clarification.

One thing to watch out for that nobody mentioned - if you don't correct the over-contribution, it's considered an "excess deferral" and you'll face a 6% excise tax on the excess amount for each year it remains in the account. That can add up quickly! Also, if you contributed to multiple 401k plans in the same year, each employer only knows about their own plan's contributions. It's entirely YOUR responsibility to track your total contributions across all employers and retirement accounts. The IRS won't catch this error for you until after penalties might apply.

I had this exact issue last year! My company's payroll system should have stopped my contributions automatically when I hit the limit but didn't. Here's what worked for me: I called the 401k provider (Fidelity in my case) directly rather than going through HR. They were actually super helpful and processed the return of excess for me. The 1099-R I received had the excess contribution amount plus some earnings. Yes, I had to pay taxes on that amount but it was way better than the alternative penalties. Don't stress too much - this is pretty common and fixable!

I went through this same situation two years ago when I switched jobs mid-year. One important detail that hasn't been mentioned yet - make sure you get the corrective distribution processed before December 31st of the year following your over-contribution if possible. While you technically have until April 15th to request the return of excess, getting it done in the same calendar year can simplify your tax situation. The earnings on the excess contribution will be taxable in the year the distribution actually occurs, not necessarily when you originally made the over-contribution. Also, keep detailed records of all your communications with your plan administrator. I had to follow up multiple times before mine actually processed my request. Don't let them brush you off - you have the right to correct this error and they're required to help you do it properly. The good news is this won't trigger an audit as long as you handle it correctly. The IRS sees these corrective distributions all the time, especially during job change seasons.