Excess 403(b) contribution

My wife's employer has taken more than the $16,500 limit out of her paycheck into the 403(b) supplemental retirement account this year. She is not over 50 so is subject to the regular limit (no catch-up amounts). We are perfectly fine with contributing more than the limit if they will let us. In fact, we would love to keep contibuting. But, I'm wondering if we should tell the payroll department or just let them keep taking money out of her check and putting it into the 403(b) account. The payroll system was supposed to cut off contributions after the limit was reached, but didn't do so. There are no matching funds involved. What do you think?

What the IRS says

Your wife is only allowed to contribute up to the specified limit, which in this case is $16,500. Maybe the payroll department has her listed as over 50, or maybe they have the codes set up incorrectly. Your wife should notify the proper person/department. It is easier to fix before the end of the year, but her plan maybe have specific rules regarding how to handle the excess contributions. Let them handle the details. Find another tax deferral vehicle and contribute to that.

Let's say you do not inform them and your wife ends the year with excess contributions. You may have a problem with not having enough income tax withheld because the excess contributions lowered her taxable income by the amount deducted. If she (or you two if you file jointly) did not withhold enough taxes during the year, then you can be subject to penalties plus cutting a check to the IRS and your state.