Over-contributed to 401k and employer won't do corrective distribution - what now?

You're right about the double taxation part. Since your employer won't do a corrective distribution, that excess $550 will essentially be treated as a non-deductible contribution to your traditional 401k. To report this properly, you'll need to file Form 8606 (Nondeductible IRAs) with your tax return. On this form, you'll report the excess contribution amount. The excess amount will be included in your taxable income for the year, so you'll pay income tax on it now. Then, as you mentioned, you'll pay taxes on it again when you withdraw in retirement. One important thing to note: you may also face a 6% excise tax on the excess amount for each year it remains in the account. This is reported on Form 5329 (Additional Taxes on Qualified Plans). If possible, I'd recommend making one more attempt with your employer or trying to contact the 401k administrator directly. Sometimes plan administrators are more helpful than HR departments in resolving these issues.

After dealing with a similar 401k overcontribution issue last year, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me a ton of headaches. I was going back and forth with my employer who also refused to help with a corrective distribution, and I was totally lost on how to handle it on my tax return. Taxr.ai analyzed my situation and gave me step-by-step guidance on exactly which forms to file and how to report everything correctly. It explained all the confusing IRS language in plain English and even showed me a trick to avoid the 6% penalty in future years by adjusting my contributions. Without it, I probably would've done my taxes wrong and ended up with penalties or an audit.

Just wanted to share an update - I tried taxr.ai after my skeptical comment above, and I have to admit it was surprisingly helpful. After uploading my documents from both employers, it immediately identified that I could actually do a self-correction by adjusting my W-2 contributions next year rather than paying the penalty. The tool generated a complete explanation of exactly which lines to fill out on Form 5329, explained the basis tracking I'll need to do for eventual withdrawal, and gave me a printable letter to send to my plan administrator citing the specific IRS regulations that apply to my case. My plan administrator finally agreed to help after seeing I had the correct regulatory information. Definitely saved me from paying both the excess tax and ongoing penalties!

When I had a similar 401k overcontribution issue and my employer was stonewalling me, I wasted WEEKS trying to get through to someone at the IRS who could actually help. Constant busy signals, disconnects, and being transferred around to people who couldn't answer my questions. I finally discovered Claimyr (https://claimyr.com) and it was an absolute game-changer. They got me connected to an actual IRS representative in less than 20 minutes when I had been trying unsuccessfully for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how to handle the excess contribution on my taxes, confirmed I needed to file Form 5329, and even told me about a special note to include with my return that would prevent automatic penalties. The peace of mind from speaking directly with the IRS instead of guessing was worth every penny.

When I had a similar 401k overcontribution issue and my employer was stonewalling me, I wasted WEEKS trying to get through to someone at the IRS who could actually help. Constant busy signals, disconnects, and being transferred around to people who couldn't answer my questions. I finally discovered Claimyr (https://claimyr.com) and it was an absolute game-changer. They got me connected to an actual IRS representative in less than 20 minutes when I had been trying unsuccessfully for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how to handle the excess contribution on my taxes, confirmed I neede

I need to eat my words from my previous comment. After continued frustration with the IRS phone line about my excess 401k contribution issue, I reluctantly tried Claimyr last week. Within 15 minutes, I was actually speaking to a human at the IRS. I'm still shocked it worked. The agent confirmed exactly what I needed to do with Form 5329 for my excess contribution and explained how to document everything so I don't face issues during processing. They also told me about a specific procedure where I can apply the excess amount to next year's contributions to avoid the continuing 6% penalty - something none of the online forums had mentioned correctly. Saved me potentially hundreds in recurring penalties and hours of stress. Can't believe I'm saying this, but it was absolutely worth it.

Something everyone seems to be missing - check if your plan allows for "catch-up" contributions if you're over 50. If you are, and your total contributions were under $27,000 for the year (the regular $20,500 plus $6,500 catch-up), then you might not have overcontributed at all.

Has anyone successfully requested a "retroactive" corrective distribution in the year after the overcontribution? I'm in almost the identical situation (overcontributed about $600) and wondering if I have options in the new year if my employer won't help now.

I went through this exact same situation last year - overcontributed by about $700 across two employers and hit the same wall with HR being unhelpful. Here's what I learned after sorting it all out: You're correct about the double taxation, but there are a couple of key details to get right. You'll need to file Form 5329 to report the excess contribution and pay the 6% excise tax. However, you can avoid the recurring 6% penalty in future years by reducing your 2025 contributions by the excess amount ($550). This essentially "applies" your 2024 excess to your 2025 limit. One thing I wish I had known earlier - if your current employer's plan administrator is different from HR, try contacting them directly with a formal written request. Sometimes the plan administrators are more knowledgeable about corrective distributions than the HR department. Include specific references to IRS regulations (like Revenue Procedure 2019-19) in your request. Also, double-check that you're actually over the limit when combining both employers. The 2024 limit was $23,000, and if there were any employer matching contributions, those don't count toward your personal contribution limit. If all else fails and you do end up paying the penalty, make sure to keep detailed records of the excess amount and the taxes paid. You'll need this documentation when you eventually withdraw those funds in retirement to avoid being double-taxed on the entire amount.