No, the earnings on a 401(k) excess deferral for 2023 will be reported on your 2024 tax return. You will enter the 2024 Form 1099-R with code 8 on your 2024 tax return and it will be added to line 1h. There will be no penalty.
Please follow the steps below to enter the excess deferral on your 2023 return:
- Click "Federal Taxes" on the top and select "Wages & Income"
- Click "I'll choose what to work on"
- Scroll down "Less common income" and click "Start" next to "Miscellaneous Income, 1099-A, 1099-C"
- Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
- On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
- Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
- On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
- On the "Any Other Earned Income" screen enter "2023 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".
If you receive the distribution of the excess deferral and earnings by April 15th then please note for the Tax Year 2024 tax filing due April 15, 2025:
Two 2024 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 2023.
- However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2024.
Please be aware, if you do not take out the excess 401(k) amount by April 15th, then you are taxed twice on the excess deferral left in the plan. This happens once when you contribute it and again when you receive it as a distribution. You can't include the excess amount in the cost of the contract even though you included it in your income.
Please see Pub 525 additional information.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
