- Neither employer is required to return the excess contributions.
- If either employer does return the excess contribution you would also lose any matching contributions attributable to the returned contributions.
- They give you back $4,000, the gain/loss adjusted amount.
- No. An attributable loss would not be a capital loss. You cannot claim a deduction for the loss.
- The coding of the Form 1099-R will indicate that there is no penalty.
You could consider leaving the excess contribution in and just report it as taxable income on your 2022 tax return. The funds will then be taxable a second time when eventually distributed because paying the taxes on an excess contribution left in does not cause the excess contribution to become after-tax basis in the 401(k).
