Dear macuser_22:
I think I understood you. Are you saying still report the excess as income like Minh's top answer, but do not take the distribution and just leave it in the plan. The double tax scenario is pay income tax right now, and pay another tax when taking distribution in the future when retire. Because if you don't report it, then there is no double tax and one got away making excess contribution.
However TurboTax's example makes it confusing, it clearly suggest always make Fidelity do the refund no matter how late.
Also, Jessica needs to amend and pay more tax because she already filed. But for folks haven't filled, they can report this as income as Mihn's answer and avoid to amend the tax. Right?
"Example 2:
Assume same information as Example 1. But Jessica doesn't discover the overpayment until November 20, and she had already filed her 2019 return. She notifies the plan administrator immediately, and she withdraws the excess on December 5.
Jessica must pay additional taxes on the overpayment because she didn't withdraw the funds by April 15. She amends her 2019 return to report the overpayment as if she received Form 1099-R (same as Example 1) and pays the additional taxes.
On her 2020 return, Jessica enters the forms she received from the plan administrator. Only the earnings on the overpayment will be added to Jessica's 2020 income."
