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DEAR TRUST OFFICER:
What happens if I contributed too much to an IRA last year? What about a 401(k)—I changed jobs last year, and contributed to both plans. I suspect I went over the limit. —THRIFTY TO EXCESS
DEAR THRIFTY:
You should get that money returned to you from those retirement plans.
For the IRA, you have until October 15 to make the correction of an excess contribution plus earnings on the excess. Failure to make the correction results in a 6% penalty tax on the excess. The penalty applies every year until the has been removed. The excess can be carried forward, so it will then count as a contribution in a subsequent tax year. If that amount, plus total IRA contributions in the subsequent year, are not excessive, there will be no additional penalty.
Excess contributions to 401(k) plans are more unusual, as plan administrators are generally strict about enforcing the rules. In a situation such as yours, with two employers and two plans, you need to have any excess contribution returned to you from one of the two plans by April 15. There’s no 6% penalty tax for failure, instead the excess will be currently taxed as ordinary income. Then it will be fully taxed again in the future when it is distributed from the plan—in other words, true double taxation.
Good luck!
Article ©2026 M.A. Co. All rights reserved. Used with permission.
John and Carlene Whittemore filed joint income tax returns from 2008 through 2014. The IRS believes that they underpaid their taxes in those years, a total of $241,600. John died in 2017. He died without a will, and no probate proceedings were opened for his estate.
In June 2024 the government filed suit to recover those taxes. Carlene was served a summons in her individual capacity (as the co-signer of the joint tax return) and as the executor of John’s estate, even though she had never been appointed to that task. She protested.
Under the relevant local law, the District Court held, Carlene was John’s sole heir and so was in possession of all the property in his estate. This made her the executor of his estate even though no probate court had given her that position. The lawsuit may proceed against Carlene under both theories.
Death will not prevent the IRS from collecting its due, even seven years later.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
The IRS has proposed regulations on the deduction for certain taxpayers of up to $10,000 of interest on a loan for buying a new car. The new tax break was included in the One Big Beautiful Bill Act enacted last July 4, and it is available for taxpayers whether they itemize or take the standard deduction.
The proposal provides definitions, and notes that a vehicle identification number will need to be included with the tax returns claiming the deduction. The loan must be secured by a first lien on the new car and must not be for more than the purchase of the new car. Excess debt will not create deductible interest. The proposed regulation also makes clear that the $10,000 limit is the same for single taxpayers or married taxpayers filing jointly.
The National Automobile Dealers Association (NADA) was supportive of the proposal, but asked for clarification of what may be financed with the auto loan. Specifically, NADA said that buyers customarily finance sales taxes, extended warranties, and vehicle service plans with their new car loans, and all these elements should be eligible for the new tax treatment.
According to NADA figures, the average price of a new vehicle in the U.S. is now $48,641, and the average term loan is 69 months. With a 10% down payment, the average monthly payment on a new car loan is $768. Monthly take-home pay would need to be $7,680 so as to keep the car payment at 10% of spendable income. That comes to annual income of $92,160 required to comfortably buy a new car. Assuming average income taxes of 27%, the family would need $126,247 in gross income to have the financial wherewithal to consider a new car. Only 33.24% of American households are in that rarified atmosphere.
The new deduction of the interest on the loan should help somewhat, but it likely won’t be a decisive factor in most cases.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
Federal tax returns are strictly confidential. It’s between the taxpayer and the IRS, and the IRS agents’ lips are sealed. That’s why it was quite shocking when ProPublica published articles in December 2021 and April 2022 with details from the tax returns of some of the wealthiest taxpayers in the U.S.
How did that happen? The IRS had outsourced certain functions to consultant Booz Allen Hamilton, and their employee, Charles Littlejohn, had stolen IRS data and transferred it to ProPublica. The returns of over 405,000 taxpayers were taken. Littlejohn pleaded guilty in October 2023, and is in federal prison.
On April 29, 2024, Kelcy Warren sued Booz Allen for the unauthorized disclosure of his tax returns, seeking statutory and punitive damages. The statute of limitations comes into play, because Warren had to file his lawsuit within two years. But two years from when? Booz Allen argued that it would be from the date of publication, December 2001, so the lawsuit is too late. Warren countered that he had no idea at that time who was responsible for the leak, he had no idea who should be sued until September 2023, when the Littlejohn indictment was announced. The Court has not decided the issue as of this writing.
Meanwhile, in January Treasury Secretary Scott Bessent announced that $21 million worth of contracts the government had with Booz Allen will be cancelled because of the firm’s failure to safeguard the IRS data and properly supervise their employee. A Booz Allen spokesperson expressed surprise at the development, as they had cooperated fully in the investigation that led to the identification of their employee as the criminal behind the leak.
Finally, President Trump has sued the IRS for damages from the leaking of his tax returns. Under the law, the IRS sent notifications to the 405,000 taxpayers who data had been breached, and Trump received his notice on January 29, 2024. He is arguing that he was not on notice of the leak until that date, so that his lawsuit comes within the two-year period for filing.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
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