IRS Pub. 525 - Taxable and Nontaxable Income states that:
If you take out the excess
- after the year of the deferral and you receive the corrective distribution by April 15 of the following year, don't include it in income again in the year you receive it.
- If you receive it later, you must include it in income in both the year of the deferral and the year you receive it (unless the excess deferral was a designated Roth contribution).
You need to report only the excess contribution, not any money generated by the investment of the excess contribution. What you earned will be covered by a 1099-R for the following tax year and will be entered then as a normal 1099-R.
To report receipt of the excess deferral please follow these steps:
- Click on Federal > Wages & Income
- In the Less Common Income section, click the Start box next to Miscellaneous Income, 1099-A, 1099-C.
- On the next screen, click the Start box next to Other income not already reported on a Form W-2 or Form 1099.
- Answer the question Did you receive any other wages? Yes
- Click through the questions till you get to Any Other Earned Income
- Answer Yes to Did you earn any other wages?
- On the screen, Enter Source of Other Earned Income mark the Other radio button and click Continue
- On the next screen, enter the amount of excess deferral with the description "2019 Excess 401K Deferrals" and click on Done.
