Every tax season, I have one or two clients who changed jobs during the year and have over-funded their 401K. It is very important when starting a new job to let your new employer know how much you have already contributed to your 401K at your old employer. If you are under 50, for 2017, the maximum amount you can contribute to a 401K is $18,000 IN TOTAL. If you are 50 or over, you can do a catch-up contribution of $6,000 for a total annual funding of $24,000.
Over-funding of your 401K can result in double taxation of your income. You will pay tax on the over-funding in the year of the mistake, as well as when the funds are withdrawn. There is a remedy to the over-funding situation but it needs to be done usually by April 1. You must notify either your old or new employer of the error and ask them to correct it.
The best thing to do when you change jobs is to call your accountant. We are always happy to help you with your new W-4 and to take a look at your final paystub from your old employer for items like 401K and HSAs (another type of contribution with maximum annual limits).
Contact us at consulting@reynoldsrowella.com to discuss your specific situation.
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