Realized I over-contributed to my 401k by $21k after job change - today's the deadline for excess contribution refund! What can I do now?

Thank you for the quick response! That's a huge relief to know I'm not totally screwed. I just sent emails to both HR departments and the plan providers with all my info and "EXCESS 401K CONTRIBUTION REMOVAL REQUEST" in the subject line. Do you know if there's any preference for which account I should remove the excess from? The Empower one with my new job is actually smaller than the excess amount ($18k), so I guess I'd need to take some from both places?

You're welcome! You've taken the right first step with those emails. As for which account to withdraw from, you'll likely need to remove the excess from your current Empower account first since it's usually easier to work with your current employer's plan. Since the excess is greater than what's in that account, you'll need to coordinate with Schwab as well to remove the remaining portion. When you call Monday, explain this situation to both providers and they can help coordinate the right amounts from each account. Remember that the withdrawal will include any earnings on those excess contributions, and those earnings will be taxable for 2025 (the year you receive the distribution), while the contribution amount itself won't be taxed again.

How exactly does taxr.ai handle something like this? Do they just look at your docs or do they actually help you fix the problem? The deadline thing has me stressed and I'm wondering if they could help me get this sorted faster than waiting for HR to get back to me.

I'm skeptical about these kinds of services. How do you know it's giving you the right advice? Do actual tax pros review your situation or is it just an algorithm? I've heard horror stories about getting bad automated tax advice.

They handle the whole process. You upload your paystubs showing 401k contributions from both employers plus any statements from the retirement accounts. Their system analyzes everything to determine the exact excess amount, then creates the proper documentation for each plan administrator with the specific amounts that need to be withdrawn. The service uses a combination of automation and human review. They have tax professionals who review complex situations like this one. It's not just an algorithm - they check the calculations and documentation before sending it to you. I was initially skeptical too, but they caught things I wouldn't have, like calculating the earnings portion correctly, which has different tax treatment.

How does this actually work? Do they just call for you? Seems weird that they could get through faster than I could just calling myself.

This sounds like complete BS honestly. How would some random service get through to Vanguard or Fidelity faster than me calling directly? They're using the same phone numbers. Sounds like a scam to get your personal info.

They don't just call for you - they use specialized dialing technology that navigates the phone trees and waits on hold in your place. When they reach a live person, they connect you immediately. It's not that they have special access to the companies, they just have systems that can stay on hold indefinitely while you go about your day. I was skeptical at first too. What convinced me was that I didn't have to give them any personal information beyond my phone number. They don't need your account info or anything sensitive - they just get you to a representative, then you handle the actual conversation yourself. I spent 3 hours on hold previously trying to reach Fidelity myself, but with their service I was talking to someone in under 10 minutes. For time-sensitive situations like 401k corrections with deadlines, it's absolutely worth it.

What exactly happens if you miss the deadline completely? Does the IRS automatically find out and penalize you, or is it something that only comes up if you get audited? Asking for a friend who may have missed this deadline last year...

If the excess contributions aren't removed by the deadline, they unfortunately remain in the plan and yes, they can be double-taxed. The excess amount will still be included in your taxable income for the year you made the contribution, and then it will be taxed again when you eventually withdraw it in retirement. There's no immediate penalty per se, but the double taxation is the real cost. The IRS doesn't automatically flag this - it would typically only come up during an audit. However, many plan administrators now report contribution limits to the IRS, so it's becoming more likely to be caught. Your friend should consult with a tax professional about their specific situation as there might be some remediation options depending on their circumstances.

This is actually incorrect advice that could cause more problems. You can't simply "redesignate" excess 401k contributions as after-tax contributions. The 401k contribution limit applies to the total of traditional and Roth contributions combined. After-tax contributions (non-Roth) are different and subject to the overall annual addition limit, not the employee deferral limit. What you might be thinking of is excess IRA contributions, which can sometimes be recharacterized, but 401k excess deferrals must be distributed with earnings.

You're right and I misspoke. I was confusing 401k with IRA recharacterization options. For 401ks, distribution of the excess is generally the only option. Thanks for the correction! What I should have mentioned is that some 401k plans do have after-tax contribution options (separate from Roth) which have different limits, but that wouldn't help with excess contributions to the regular pre-tax/Roth portion that's subject to the $23,000 limit for 2025.