I believe the excess deferral will be automatically detected by Turbotax from your W-2s and automatically added back to your taxable income. Don't manually add back the income because you will be double-taxed.
@dmertz ??
You could leave the money in the account with no penalty. The problem is you would pay tax now (because it's excess) and you pay income tax again when you retire and withdraw the money (because that's how 401k plans are taxed.) Since you have to pay tax on the money no matter what and don't get the tax-free treatment, the idea is you might as well withdraw it and spend it or invest it some place else. '
But I'm pretty sure the add-back is automatic.
Then in 2023, you will get a 1099-R for the distribution with code P, which means, "corrective distribution that was taxable in a prior year." You report it on your tax return, but Turbotax will know not to include it in 2023 taxable income because of code P.
[Edited by original author]
