@hozefas wrote:
Hello @DianeW777
I have a similar situation where my overall deferral for 2021 went above the limit by $500. I have NOT filed my 2021 return yet. But in my case, the 401K provider will NOT be able to refund the $500 before the tax filing deadline (April 18th 2022) - since they need more time to process the refund.
Do I have to show $500 as my income in my 2021 return?
Is that done by manually creating a 1099-R with Code 8 for $500?
Do I need to submit form 5329 and pay a 6% penalty in 2021?
Will my 401k provider send me 2 1099-Rs (Code P and Code 8 in 2023?
Do I have to amend my 2021 return? Or do I just enter that 1099-R in my 2022 return?
Thanks!!
The date to remove it is not tied the the filing date, it is written into tax law as April 15, reguardless of the filing date which can be different.
If not removed by April 15, then it should not be removed at all since after that date it becomes taxable income that must be reported on line 1 of the 1040 form as wages since it was deducted from wages when the employer withheld if from your pay. It will just stay in the account until retirment when it will be taxed again. This double tax is the penality for not meeting the Apr. 15 date.
Excess 401(k) deferrals should be reported in:
(There are several screens to click through to get to the right place)
Miscellionious Income ->
Other Income not reported on a W-2 ->
Other wages (yes) ->
House Hold employee (Continue) ->
Sick Pay (Continue) ->
Other earned income (yes) (Includes excess salary deferrals)->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.
This will add the returned excess to your 2021 wages on line 1.
For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf
**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.**
