The 401k contribution deadline is at the end of the calendar year.
However, the IRS allows contributions to IRA accounts up to the tax filing deadline of the coming year. For the 2021 tax year, you can contribute to your IRA accounts until April 15, 2022. If you have a SEP IRA and file an extension, you have until the extended filing deadline or when you file your tax return to make the contribution.
Most employer tax deductions for 401k contributions and other salary retirement plans usually apply only to the calendar year in which they are actually withheld from the taxpayer’s paycheck.
However, employers can make contributions until their tax deadline for the year. For 2021 tax filing, businesses typically have until April 15, 2022. This offers added flexibility for those doing one-time contributions, profit sharing, or other one-off arrangement. This also means an employee technically can make 401k contributions as late as the deadline for their company to file its taxes, including any extensions.
Additional time becomes especially important in the case of someone who is self-employed. Individuals in these circumstances may not choose to contribute to their solo 401k plan for a given year until tax time the following year. The ability to do so can depend on the business type and whether the contribution is by employee deferral or through a profit-sharing component.
401k plans can vary, so we recommend talking with an HR professional. For instance, contributions for a prior year may not be allowed because an employee is limited to making contributions through payroll deductions.
What Are the 401k Contribution Limits?
Tax deductible contributions to 401k plans and other retirement accounts are subject to IRS limits. These limits are given cost-of-living adjustments from time to time. For tax year 2021, the 401k contribution limit is $19,500 who those who participate in 401k, 403(b), and most 457 plans. If you’re over the age of 50, your limit is $26,000.
Read More: 401k Contribution Limits for 2021
Employer-matching contributions don’t count toward this limit, but there is a limit for employee and employer contributions combined: Either 100% of your salary or $57,000 ($63,500 if you’re over 50), whichever comes first.
Limits for Highly Compensated Employees
If you earn a high salary, you may be considered a highly compensated employee (HCE), subject to more stringent contribution limits. To prevent wealthier employees from benefiting unfairly from the tax benefits of 401k plans, the IRS uses the ADP test to ensure that employees of all compensation levels participate proportionately in their companies’ plans.
The Bottom Line
Generally, the 401k has a hard contribution deadline at the end of the year. But you can check with your company’s human resources department or a Personal Capital financial advisor on how to make the best decisions for your retirement and to see if you’re permitted to make contributions in the new year— before tax time next spring.
The best next steps for you? Get a comprehensive view of your entire financial life so that you know when and how much you can contribute to your 401k.
- Sign up for Personal Capital’s free financial tools to track your entire portfolio for free, and check up on your chances for retirement success.
- Consider speaking to a financial advisor about your retirement plan.