@shung wrote:
If we already missed the window for which we can do the reversal, then I guess we'll have to keep the excess contribution in the account and pay tax again in the year we receive the distribution as per normal with all the other funds that are in the 401K account?
Yes, April 15 was the last day the excess could be returned. You still must report it as an excess and pay the tax on the excess and will be taxed again when finally distributed. That is the penalty for missing the removal date. (The upside is because the security market has been strong, you actually might be money ahead with the excess still invested and earning income that might exceed the tax.)
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 2020 wages on line 1 exactly the same way that the 1099-R would. The only information that is sent to the IRS is the line 1 amount.
**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.**
