Removal of excess roth solo 401k

I accidentally contribute $168 too much to my solo roth 401k, the max is $19,500 so I filled out a removal of excess form from TD bank and they took out $185 with a calculation showing earnings.

The account value is in the $17,000 range because my holdings have gone down steadily since I made the first contribution 2 months ago.

is this normal that they are calculating earnings when in fact there was losses?

I accidentally contribute $168 too much to my solo roth 401k, the max is $19,500 so I filled out a removal of excess form from TD bank and they took out $185 with a calculation showing earnings.

The account value is in the $17,000 range because my holdings have gone down steadily since I made the first contribution 2 months ago.

is this normal that they are calculating earnings when in fact there was losses?

Well, I would dispute that your holdings have ‘gone down steadily’ since 2 months ago - there have been lots of up days in the last two months, as well as down days. The timeframe that is in question starts on the date that the excess contribution was made and the date that the excess contribution was removed. You should check to see what your account balance was on those dates, and see if it had gone up or down. The calculations they provided you should show that information.

AJ

yes they provided me the numbers and the account value ending from the previous month before was lower because it did not include contributions that I made.

so the account value went up only because I made cash contributions.

The stocks lost ~8% during the time period

I’m just baffled how I can have earnings when the stocks went down

how can they say my cash contributions are “earnings” ?

how can they say my cash contributions are “earnings” ?

They shouldn’t be. However, I would suggest that you need to look at the balance at the end of the specific day that the excess contribution (not the end of the month before) and the balance at the end of the specific day before the excess contribution was removed (again, not an end of month figure), and see if there was a gain. There was enough volatility over the last two months that a gain would not be unheard of. If you show that there wasn’t a gain, you need to call them and ask why they calculated a gain.

AJ

thank you for the help

yes you are right, there was a gain of like $1,600 because I was buying more shopify at 800 lol

so now it’s all making sense, even though I think it’s stupid that now I am getting taxed on $16 even though the account is $2k under water since I first contributed 2 months ago

I have to figure out what I need to do tax wise or what paperwork so I dont get in trouble for this taxable amount I “gained”

so now it’s all making sense, even though I think it’s stupid that now I am getting taxed on $16 even though the account is $2k under water since I first contributed 2 months ago

That’s $16 more than you would have had on the day the excess contribution was removed, had you not made the excess contribution. The fact that your account is down now from when you contributed is irrelevant - it was up on that day. That said, taxes on $16 are going to be in the range of $2 - $6, depending on your bracket. So, it doesn’t seem to be something that should concern you very much.

I have to figure out what I need to do tax wise or what paperwork so I dont get in trouble for this taxable amount I “gained”

You will get a 1099-R for 2022 that will document the $16

AJ

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