I don't agree with the advice given regarding how to report the distribution of an excess contribution to a 401K plan. The important thing here is that the amount of excess contribution was distributed before the deadline. Taxpayer must wait until they receive form 1099-R, the year after, in order to report the transaction in their tax return. If 1099-R has code P in box 7, they will amend prior year return and add the 1099-R. If it has code 8 in box 7, it will be added to the tax year it was issued. Keep in mind that the plan administrator will withhold taxes from the excess contribution. Reporting the excess contribution by adding it to the wages before receiving the form 1099-R, will not take in consideration the tax withheld, nor the earnings that will be added to Box 1. Bottom line, wait until you receive form 1099-R in order to report the transaction in your tax return.
