Can an employee still contribute to their employer sponsored 401?

[rw4330]

My clients (married filing jointly) contribute to a 401k and 403b. Can they still make a contribution to their employer sponsored plan to lower their taxable income for 2021? Does it depend on the employer? This should produce a W2C which would show the reduced taxable income. 

[qbteachmt · Accepted solution]

It's a bit late to Withhold from a 2021 paycheck, don't you think?

[rw4330]

Yep - I do think. Hence my question. Everyone has a first time circumstance. This is mine. Thanks for your thoughtful answer.

[qbteachmt]

If it will help make sense further: individuals might not know their contribution limit until the tax return is done, so we have until that date to contribute to our own retirement accounts for the prior year. The same is true for an employer; the business return will give them some info upon which to base, for instance, profit sharing or nonelective contributions.

But the employee is deferring Wages. That means from Paychecks for the year. Not from a different or for a different year.

That's also why the employer's Plan needs to be established by the end of the year for the year under consideration. Otherwise, it isn't in time for that year, for the employer contribution.

[rw4330]

This makes complete sense! I was shooting for the moon, and  hoping for a longshot answer. I hate to see anyone owe. Also, my client's financial consultant from his employer insisted that he could contribute an additional $6,500 (which they are under age 50) and have the credit. None of it made sense to me because of  what I read on the IRS website. If my clients are covered by an employer plan, they are limited to what will be allowed as a credit. The limit for them was only $570 per person. I wanted to  be wrong to relieve them of some of their tax liability. Thank you so very much for the comprehensive answer! 

[qbteachmt]

"Also, my client's financial consultant from his employer insisted that he could contribute an additional $6,500"

Well, if you read many posts on this forum, these "financial consultants" seem to be so uniformed, it's ridiculous. Now that they know this, they would be cautious to believe this person going forward. And I would ask my employer to find a new plan consultant. I was a benefits manager and when we shopped for plans, one of the consultants kept spelling many employees' names wrong, even after going over it in person. if you can't spell our names right, how can we trust you with our money?