@Moussa Nancy wrote:
Hi,
This is my first time posting on TT Community. I am impressed that it is a pretty interactive tool.
First, thank you for your explanation. The issue here is that the 1099-R that will be issued next year has more than the returned excess reported on it. It will have some earnings, probably a few dollars, and mainly the tax withheld, federal and state. How to handle the 1099-R next year if you already added the returned excess to the wages in the current return?
Thanks!
Nancy
It should not. If the earnings are included on a 1099-R with a code P then it is an improper 1099-R because a code P can never report earnings. The excess is reported returned wages in the tax year that the excess was made and the earnings taxed in the year returned.
The earnings can only be reported on a separate 1099-R with a code 8 that is reported on the 2020 tax return.
For information see IRS 2019 Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf
[quote]
"If the distribution was for the income earned on an excess deferral, your Form 1099-R should have code 8 in box 7. Add the income amount to your wages on your 2019** income tax return, regardless of when the excess deferral was made.
**NOTE the latest IRS Pub is for tax year 2019, that will become 2020 for the 2020 tax year.
**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.**
