@Country Apple wrote:
Based on my own experience, if your 2019 over-contribution (due to employer ADP testing failure) was refunded to you before April 15, 2020, then you will receive a 2020 1099-R in January 2021. You would include the 1099-R in your 2020 return (if code 8 is used in box 7) and it will be added to your income and taxed as regular wages. TurboTax added my 1099-R to my regular W2 wages. This is how I do it, as my employer's plan fails ADP testing every year and I will receive a 1099-R every year.
There is guidance out there that says you should include the over-deferral amount in your 2019 wages. You may opt to do that, however, you will definitely receive a 1099-R for the year in which actual distribution occurs. Then you will have to explain to the IRS that you already reported the 1099-R in the previous year.
A 2019 excess returned in 2020 should have two 1099-R's - one with a code P that puts the excess on the tot for line 1 as wages, and one wit s code 8 that only reports the earnings which are taxable in the year returned which would be 2020.
A single 2020 1099-R with a code 8 that contains the the excess and earnings in box 1 and 2a is for a 2020 excess deferral and not a 2019 excess.
**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.**
