I over contributed multiple times to my solo roth 401k in 2022 and my question is about calculating the earnings associated with each separate over contribution which were done at various points during the year.
When I do the withdraw of excess form do I have to do one for each time that I over contributed so If I had 4 separate times that I did contributions that were over, so I have to do 4 different calculations using the equation
Net income = excess contribution X (ACB−AOB)/AOB
Or can I just do one calculation and use the date the first over contribution was made as the Account Opening Balance, and add up the total excess contribution for that part of the equation?
obviously the latter would be easier.
I had to change administrators during the year that’s why the new one can’t just calculate it all for me. thanks for any help.
edit:
Over contributed to roth solo 401k need to calculate the earnings to take out but very confused. I know the equation is Net income = excess contribution X (ACB−AOB)/AOB
for example new solo roth 401k account opened in 2022. If I contributed $5k in jan 2022 then $10k in june 2022 then $4k in Aug 2022 and at now at tax time I see I can only contribute $7k. Account balance currently is down good amount lets say it is $15k for this example.
What would be the correct way to calculate the earnings? this is what is confusing me
What is the reason you can only contribute $7k? Is it because you have contributed to other 401(k)s? Is it because you did not earn enough as a business to make a contribution?
There may be other ways to fix this, but at this point, it’s a little late to be asking.
Well, it’s probably too late to do now, but you should have been consulting with a tax professional. That said, with the example you have given, it appears you may be calculating losses, not earnings, although that may be different for each contribution, depending on what the balance was on each contribution date.
Start with the most recent excess contribution and work backwards using your formula, adjusting the account ending balance by removing the excess contribution and earnings/losses before you calculate the next one.
Thank you so much for reply I have been searching to find an answer to this for a few days now.
ok so I do need to do them all individually and come up with the final answer of earnings at the end, that was my question. Then I’ll add (subtract) that to what was over contributed and I’ll know how much I need to take out.
the business just didn’t earn what I expected it to that is the reason for the over contribution which was all done in jan 2022.
So you as the employee, only made $7k on your business? Because, as the employee, you are allowed to make contributions of at least $20,500 to a 401(k), as long as you have at least that much compensation.
That said, I will say that if you are self-employed, waiting to make 401(k) contributions until you are sure how much your business is going to pull in will save you a lot of headaches.