@romeshdaisy wrote:
I have been reading through all the posts on excess 401K deferrals. In the end I am still not 100% sure what is the right way to go ahead with filing with TT. In my case the 2019 excess deferrals check came to me before April 15, 2020 and the reason was that my employer company failed to satisfy the ADP test. I received a check for $ 12000/- together with a statement from the plan provider that gave its break-up of Excess amount of $10500 plus Earnings of $2500.
The point that is unclear to me pertains to this narrative in macuser_22 post:
"Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Include the loss as a negative amount on Schedule 1 (Form 1040), line 21, and identify it as “Loss on Excess Deferral Distribution.”
Enter as:
Miscellionious Income ->
Other reportable Income ->
Any Other Taxable Income (yes) ->
Description (enter "Loss on Excess Deferral Distribution" and amount as a negative number)."
Does it mean that you report a loss on a corrective distribution of an excess deferral in the 2020 return?
WHAT I DID SO FAR IS THAT I ADDED $10500 AS MISCELLANEOUS INCOME AND FOLLOWED EXACTLY WHAT IS SAID ABOVE.
IS THAT ALL I HAVE TO DO FOR THE 2019 RETURN ON THIS COUNT?
ANY HELP WOULD BE EXTREMELY APPRECIATED.
Thanks in advance!
Before you do that, ask the plan trustee how it will be reported. If the employer plan made the error with the ADP test and the excess is returned under the "Employee Retirement Income Security Act" (ERISA) then that is totally different and the employer must issue a 1099-R with a code E in box 7 and that is reported in the tax year returned with the 1099-R, not as an excess deferral. You would report the 2020 1099-R next year when doing 2020 taxes.
**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.**
