@AMS2022 u wrote, "Box 2a will be the same total amount of $2951.17 as the entire amount needs to be taxed in 2022. " That's wrong. It should be $2,900.98, the amount of the excess deferral. Earnings is taxed in the year of distribution, not the year of contribution. See my post from yesterday and the Thomson Reuters link below. Once again, assuming the $2,951.17 was distributed to your wife by the IRA trustee, you should contact the IRA trustee to make sure they will be coding the excess deferral with a "P" in Box 7.
Since the money was distributed after April 15, 2023, you have a different problem. I believe the only way out is if you live in a federally declared disaster area such as most counties in California where the original filing due date has been postponed to mid October.
https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-annual-salary-de...
Correcting excess deferrals
The excess deferrals can be correcting by distributing the excess (including earnings) by the due date of your tax return.
Consequences if excess is not corrected
If the excess is not timely distributed, it is:
- included in your taxable income for the year contributed, and
- taxed a second time when the deferrals are ultimately distributed from the plan.
The excess deferrals may not be distributed until a distribution is otherwise permissible under the terms of your plan. Additionally, you do not receive basis in the excess deferrals.
https://tax.thomsonreuters.com/news/irs-reminds-taxpayers-to-remove-excess-salary-deferrals-by-april...
For a taxpayer who withdraws excess salary deferrals, plus earnings, by April 15, 2022:
- Excess deferrals are taxed as 2021 income.
- Earnings on excess deferrals are taxed as income in the year withdrawn (2022).
- Excess deferrals aren’t subject to the 10% early distribution tax, 20% withholding, or spousal consent requirements.
However, if taxpayers with excess deferrals don’t withdraw those excess deferrals, plus earnings, by April 15, 2022:
- Excess deferrals are taxed as income in 2021 and again when they are withdrawn.
- Earnings on the excess are taxed in the year withdrawn.
- Withdrawals may be subject to the 10% early distribution tax, 20% withholding, and spousal consent requirements.
To avoid double taxation, taxpayers who have exceeded the contribution limits should ask their plan administrator to distribute any excess amounts to them before April 15, 2022.
