401(K) Excess Contribution


Z

Zerang Shah

My former employer just sent me a letter informing me that I
contributed too much to my 401(K) in fiscal 2006 - not more
than the IRS limit of $14K, just more than the percentage of
income that their plan allows. I have already rolled this
money over to an IRA. In the letter they say I have to
withdraw that money from the IRA (it won't be subject to
pre-mature distribution penalty) and then pay tax on that
sum for fiscal 2006. They say I will be sent a 1099-R in
January 2008 which I must file with my fiscal 2007 tax
return, however the income is taxable in fiscal 2006. Two
questions:

1) Can I file my taxes without including this additional
income, then later file an amended return when I get the
1099-R next January? This way I can delay paying the tax for
a year, but is it legal?

2) If I choose to pay the tax on the excess distribution
along with my 2006 tax return I will end up owing
approximately $1000 in taxes. Will I then have to pay an IRS
penalty for not paying quarterly estimated tax?

Thanks for the help.
 
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