What happens if the contribution amount exceeds the maximum amount allowed in a given tax year?
The amounts that exceed the maximum contribution (“excess contribution”) are not eligible for deduction from the employee’s gross income. Also, an excise tax of 6% on the excess amount is imposed on the account beneficiary for each taxable year. Certain exceptions apply to the excise tax, e.g., if funds are pulled out before the tax-tiling deadline for that year.
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