How to determine if excess employee contributions to Traditional/Roth accounts was fixed in return

[slick77889]

For the 2020 tax year I I contributed to two separate retirement accounts resulting in an over contribution.  I thought I remember TurboTax alerting me to this and asking if I would be withdrawing the money before filing.  What I can't remember is whether I chose yes or no.  In the end I did withdraw the money and all of the gains so I'm now trying to determine if I need to file and amended return or not.  Is there a way in TurboTax to indicate that the excess amounts were included in my federal and state returns? 

If the amount of the excess contributions were not included in my original filing then my understanding is that I should an amendment.  I can report the excess contributions, the earnings would be reported in next years filing since I withdrew them in March of 2020, via the Miscellaneous Income section and use the Other income not already reported on a Form W-2 or Form 1099.

[DanaB27 · Accepted solution]

To clarify, did you withdraw the excess in March 2020 or March 2021? If you withdrew it in 2020 you would have Form 1099-R for the withdrawal already and you will just enter the 1099-R on your 2020 return. And you are talking about an excess contribution to 401k (work retirement account) not a traditional IRA or Roth IRA, correct?

You can check line 1 wages if you had the excess deferral already included. Otherwise you will you will to amend your return to include the excess. Please see FAQ How to amend a tax return for instructions.

To report the excess 401(k) contributions and subsequent distributions, a 2020 plan excess distributed in 2021 please follow the steps below:

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Scroll  down to "Less Common Income" and click "Show More"
4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
5. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
6. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
7. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
8. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
9. On the "Any Other Earned Income" screen enter "2020 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

Please note for the Tax Year 2021 tax filing due April 15, 2022: 

2021 Forms 1099-R will be issued reporting the excess.

• Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2020. 
• However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2021.

If the distribution was for a 2020 excess deferral to a designated Roth account don’t add this amount to your wages on your 2020 return.

Please, see Pub 525 page 11 for additional information.

[slick77889]

Thanks for the help.  I withdrew the excess contributions and earned money in March of 2021.  So it sounds like I'll file an amendment with the excess contributions this year and then next year I'll include the money earned on those contributions on the tax year 2021 filing.

[DawnC]

Yes.  Follow Dana's steps above and file the amendment (if you did not add the deferrals to your wages already) and next year, enter your 2021 Form 1099-R as you see it.   When you enter it, you will get a message that says ''You need to amend your 2020 return'' which you can ignore.   The codes referenced in Box 7 will allow TurboTax to properly report the earnings.   The code P will be ignored as it means 'excess taxable in the previous year'.    Code 8 indicates taxable in the current year, which will be 2021.