An excess 401(k) deferral must ALWAYS be reported as wages for the tax year that the excess was made. That is because the deferral was deducted from your W-2 box 1 taxable income by the employer. When that becomes as excess deferral then is cannot be excluded from taxable income, therefore yiu must add it back.
If timely removed with the earnings then only the earnings will be taxable income in the tax rear returned. If not timely removed then it will be taxed the same as any other 401(k) normal distribution whenever it is removed. That is independent from including the excess as wages in the year the contribution was made.
**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.**
