Retirement tax questions

In general excess deferrals from 401(K) plans are taxable for the year in which they were made (I.e. if these deferrals were made in 2019 they would be taxable on your 2019 tax return. An amended Form 1040 for 2019 may be necessary).

These excess deferrals must also be made by April 15 of the following year (i.e. April 15, 2020).

Earnings/loss on the deferrals are taxed in the year they are received (so in 2022, if you received the earnings/loss in 2022).  These are reported as "Other Income".

 If this was a return of excess deferrals for 2109 made in the current year, you should amend your Form 1040 for 2019 to include them on that return.

Click here for instructions on preparing an amended tax return.

See IRS PUB 525, Page 11:

Excess distributed to you. 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). Any income on the excess deferral taken out is taxable in the tax year in which you take it out. If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Use the following rules to report a corrective distribution shown on Form 1099-R for 2022. • If the distribution was for a 2022 excess deferral, your Form 1099-R should have code 8 in box 7. Add the excess deferral amount to your wages on your 2022 tax return. • If the distribution was for a 2022 excess deferral to a designated Roth account, your Form 1099-R should have codes B and 8 in box 7. Don’t add this amount to your wages on your 2022 return. • If the distribution was for a 2021 excess deferral, your Form 1099-R should have code P in box 7. If you didn't add the excess deferral amount to your wages on your 2021 tax return, you must file an amended return on Form 1040-X.

 If you didn't receive the distribution by April 15, 2022, you must also add it to your wages on your 2022 tax return. • If the distribution was for the income earned on an excess deferral, your Form 1099-R should have code 8 in box 7. Add the income amount to your wages on your 2022 income tax return, regardless of when the excess deferral was made. Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Include the loss as a negative amount on Schedule 1 (Form 1040), line 8z, and identify it as “Loss on Excess Deferral Distribution.” Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it isn't otherwise treated as a distribution from the plan. It can't be rolled over into another plan, and it isn't subject to the additional tax on early distributions.

If the distribution was for a 2019 excess deferral, your Form 1099-R should have the code P in box 7. If you didn't add the excess deferral amount to your wages on your 2019 tax return, you must file an amended return on Form 1040X. If the distribution was for a 2019 excess deferral, your Form 1099-R should have the code P in box 7.  If you didn't receive the distribution by April 15, 2020, you also must add it to your wages on your current tax return (i.e. 2022)

If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code 8 in box 7. Add the income amount to your wages on your 2022 income tax return, regardless of when the excess deferral was made. For income and losses on the excess deferral it is reported in the year it is received.

Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you (i.e. 2022).


Click here for Pub 525 issued by the IRS.

Click here for the instructions for Forms 1099-R.

Click here for a link regarding excess deferrals.

This is a complex issue and you should speak to your employer and/or Pension Plan Administrator regarding the proper way to handle this "late" return of excess deferrals if they were made in 2022 for the 2019 plan year.