Retirement tax questions

I reviewed your return and noticed that your spouse had two W-2s. If you add the contributions on both of her W-2s with code D—Elective deferrals to a section 401(k) in box 12 then this totals more than the allowed $20,500 for 2022.

Please be aware that your spouse can only contribute up to $20,500 across all of her 401(k), 403(b), SIMPLE plans (SIMPLE IRA and SIMPLE 401(k) plans), and SARSEP plans. In addition, she can contribute up to 20,500 to the 457(b) plan. But she contributed more than $20,500 to both of her 401(k) plans. Therefore, the message about the excess contribution is correct.

To fix this she should contact her plan administrator. If the plan permits, the excess amount will be distributed to her. The plan must pay you the amount of the excess, along with any income earned on that amount, by April 15, 2023.

Please be aware, if you do not take out the excess amount by April 15th, then you are taxed twice on the excess deferral left in the plan.  This happens once when you contribute it and again when you receive it as a distribution. You can't include the excess amount in the cost of the contract even though you included it in your income.

You will have to include the excess deferral in your 2022 tax return. Please follow these steps to report a 2022 excess 401(k) deferral:

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 "2022 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

If you receive the distribution of the excess deferral and earnings then please note for the Tax Year 2023 tax filing due April 15, 2024: 

2023 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 2022. 
• However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2023.