@dkang94 wrote:
So where I get confused is that the 1099-R code P showed the right overcontribution number in box 1, but a different, lower number in box 2. The number in box 2 is what I got sent to me as a check back in March 2019 as the corrective distribution.
I did not get a 1099-R code 8, as I never got a second distribution of earnings.
Should I have received the full gross amount back in March 2019? Or did they send me a lower number because I had already incurred losses on that overcontribution?
You should have been sent a check for the excess plus the earnings.
The IRS Pub states: "Any income on the excess deferral taken out is taxable in the tax year in which you take it out." The "income on the excess" is the earnings, taxable in 2019 since that is when it was taken out.
It would appear the the 1099-R is incorrect for a 2018 excess returned in 2019. The earnings should not be in the code P because as the IRS Pub states: "If the distribution was for a 2018 excess deferral, your Form 1099-R should have code P in box 7."
And further states: "f the distribution was for the income earned on an excess deferral, your Form 1099-R should have code 8 in box 7."
The code P should have ONLY the excess in box 1 and box 2a and goes on your 2018 tax return. A separate code 8 1099-R should have only the earnings in box 1 and 2a and goes on yiur 2019 tax return.
You should refer the 401(k) trustee to the IRS publications for a corrected 1099-R code P and a 2019 code 8 1099-R. If they refuse then you should ignore the 1099-R and enter two substitute (4852) 1099-R's with explanation statements (that the interview will ask for) to replace the incorrect 1099-R that you have.
[A 2019 1099-R with a code P and both the excess and earnings does not make sense because it would say that both the excess AND earnings were returned in *2018*, but if that was the case and it was a 2018 distribution then it would be on a *2018* 1099-R with a code 8 and yiu would not have a 2019 1099-R at all.]
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
