Retirement tax questions

Yes, you will have to remove the excess deferral by April 15th to avoid double taxation on the amount. You will request to remove the excess contribution, it seems as if you have a loss at the moment and therefore you will not have any taxable earnings. The brokerage firm should be able to calculate the loss and calculate the correct distribution amount.

You also have to include the excess deferral of $1,800 in your income, please follow these steps to enter this in TurboTax:

Please follow the steps below:

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Scroll  down to "Less Common Income" and click "Show More"
4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
5. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
6. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
7. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
8. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
9. On the "Any Other Earned Income" screen enter "2021 Excess 401(k) Deferrals" for the description, enter the amount of $1,800 and click "Done".

Please note for the Tax Year 2022 tax filing due April 15, 2023: 

2022 Forms 1099-R will be issued reporting the excess.

• Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2021. 
• However, since you had a loss you should not get Form 1099-R with Code 8 in box 7  that reports earnings. Any earnings are reported in 2022.