Dear @DanaB27 ,
The advice given in the above reply, how to report the excess deferral in the year the income was erroneously deferred, is contrary to the advice provided in TurboTax. The following is the "help" provided in TurboTax 2021 (to address an excess deferral that occurred in 2021 and is discovered it before filing 2021 taxes) :
Steps to Take to Remove an Excess Salary Deferral
1. Figure out which retirement account you want to remove the excess salary deferral from. You can use IRS Publication 560, Retirement Plans for Small Business, to help you decide.
2. Notify the plan administrator (the company or broker that handles your retirement account) that you have an excess salary deferral as soon as possible. Depending on the rules of your plan, and whether the plan administrator is notified sufficiently ahead of the tax return due date, you may be able to withdraw the funds to avoid paying additional taxes on the excess deferral. If you are able to withdraw the funds, here is how to
report that:
1. Report the excess deferral on your 2021 return in the Income section for Retirement Plans and Social Security whether or not you received a Form 1099-R before you file your return. Enter as much information as you can. Report the excess deferral amount in boxes 1 and 2a, and use code P in box 7. Indicate that this is a 2022 Form 1099-R.
2. In 2022, you will probably receive two Forms 1099-R. One reports the excess deferral amount. The other reports the earnings on the excess deferral. Enter both of these forms in your 2022 return, and we'll only add the earnings to your 2022 income.
So ... what is the right way? I notified the plan administrator March 1, now waiting for the employer to make a disbursement and issue a 1099-R. If I do receive the 1099-R before April 15, 2021, which advice to follow? Or, if I do not receive it by April 15, which advice to follow?
One last item, if I follow the "help" advice, the referenced code P in box 7 says it is for 2020, which casts some doubt the "help" advice.
