@marty00 wrote:
Thanks, @macuser_22!
Procrastination is never good but due to COVID and other issues, I started my taxes this 4th weekend as it usually relatively straightforward, so I thought! Little did I realize that I contributed to my 401K in excess in 2019 due to a change in job and a bonus payment that came in later.
I don't believe Fidelity will not be able to return the excess amount before July 15th (they have to snail mail the forms, yes in 2020!). I will follow option 2 mainly because I won't have all the (accurate) info for1099-R.
While filing taxes for 2020 next year, I will ignore one of the 1099-Rs that I will receive. Hope my way forward is correct. Any other thoughts? [I am responsible for my decisions but appreciate the guidance].
You misunderstand. You do not have until July 15 to remove the excess. That date was April 15, 2020. The IRS decision to delay tax returns to July 15 had no effect on the April 15 date to remove excess 401(k) contributions since that is codified in law and cannot be changed administratively.
Since is cannot be removed then it still must be taxed as an excess that can only be entered as below and must remain in the 401(k) as before tax money which means that when finally withdrawn to will be taxed again - that is the penalty for not timely removing it by Apr 15. That is explained in IRS Pub 525 page 10.
You will not receive any 1099-R because it cannot be returned so you must report it this way on your 2019 tax return.
Miscellionious Income ->
Other Income not reported on a W-2 ->
Other wages (yes) ->
House Hold employee (Continue) ->
Sick Pay (Continue) ->
Other earned income (yes) (Includes excess salary deferrals)->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.
This will add the excess to your 2019 wages on line 1of the 1040 as required.
**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.**
