401K catch-up contribution
11/6/09 12:48 PM, Viewed by asker 11/7/09 6:51 AM
Total Views: 34
My client made a contrib $18,327.33 into his 401K and the software limited it to the $15,500 and add the balanced back to income and he paid tax on it. Now he has come back to me and ask about the catch-up contribution, up to an additional $5,000.00? How
do I enter this in Lacerte?
Comment
Since the birthdate is already a required field, in Lacerte, it makes me think that your client isn't old enough for the catchup contribution. Lacerte automatically handles it if they are allowed the catchup. If they aren't allowed the catchup and they really did contribute too much, they have larger issues than just the extra income. They might have an excise tax if they didn't withdraw the excess funds. You'll probably want to do some additional research if they're under age.
Answer
Lacerte doesn't limit it and add it back. Lacerte pops a diagnostic saying that you're over the limit, and telling you how to do the addback manually if appropriate. Note that that diagnostic does not appear until you're over the age-corrected deferral amount. (6/30/59 birthdate has a diagnostic at 15,500. 6/30/58 birthdate has a diagnostic at 20,500.)
If you incorrectly added the catchup contribution to wages, and the client was legitimately old enough, amend the return without an entry in Screen 14.1, Code 26.
Comment
I think if you enter the taxpayer's birthdate in Client info then Lacerte will know that the $18K is allowed.