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My employer deferred 6% of my income in 2019 to my 401k. I would like to now contribute up to the maximum limit of 19,000 in order to reduce tax liability. However, turbotax is saying that my income is too high (above 74,000) to make a contribution to a traditional IRA. What's going on here? The IRS says you can contribute up to 19,000 (I am below age 50) but yet, it seems that I missed my opportunity to do so because I did not have my employers payroll department defer it? Why can I not simply contribute the difference now? How do I get through turbo tax's limitation?

Also my employer used to offer a pension plan benefit that was 3% of our annual compensation (they just concluded that program in 2019 and in future will offer only the 401k). The account was separate from our 401k. I am not clear about what kind of IRA that is and if it is included in the limit on contributing to a 401k.

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    401k and IRA are different things. You can always contribute to an IRA, but only 6000, and if you over the income limit, it is not tax-deferred. The 401k contributions are limited to 19000, but they must come directly from your employer through payroll; for 2019, you missed that bus. Adjust it for 2020.
    – Aganju
    Commented Mar 17, 2020 at 1:21
  • I always thought that a 401k was a type of IRA. That's really bad news. I am paying absurd amounts in taxes.
    – tnk479
    Commented Mar 17, 2020 at 1:24
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    @tnk479: More a question for the Politics site, but one of the reasons you can't contribute more to a tax deductible retirement account is that the government really wants you to keep on paying those absurd taxes. The intent of 401k and traditional IRA plans was to encourage low to moderate income people to save more for retirement, not to serve as tax shelters for high-income people.
    – jamesqf
    Commented Mar 17, 2020 at 5:55

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401(k) plans are, for the most part, funded by voluntary deferrals by the employee, that is, you have to make a conscious effort to do something to put money into your 401(k). It used to be that the deferral was entirely voluntary, but so many people were ignoring the opportunity that the Government changed the rules to make a small percentage mandatory in the sense that every employee was signed up for x% deferral and the employee had to go to HR and fill out paperwork to remove this deferral if he/she really didn't want to save money for retirement.

Turning to your question (posted in 2020), it is too late to put money into your 401(k) plan for 2019 but you can, if you hustle down to HR as soon as their office opens, sign up for salary deferrals for 2020. Money put into a 401(k) plan is almost always via deductions that are made by the employer from salary or wages or bonuses etc and put into the 401(k) plan on your behalf; you cannot march into HR with a wad of cash or a check and demand that the money be put into your 401(k) plan. Also, as a general rule, the payment is for the year of the date on the paycheck, not for the year in which the money actually arrived at the 401(k) plan administrator's office; money taken out of a December 31, 2020 paycheck will be a contribution for 2020 even if the money doesn't arrive at the administrator's office till January 2, 2021.

Finally, 401(k) plans are not IRAs, and one can always defer earned money (up to $19K, more if you are over 50) into a 401(k) plan regardless of what you do with IRAs. But the deferral must be from paychecks dated during the year in question whereas IRA contributions for 2019 can still be made for 2019 until Tax Day.

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