Retirement tax questions

No, you don’t need to add the excess contribution to the Roth 401(k) since these are after-tax contributions. 

Excess contributions to 401(k) won’t trigger a penalty like excess contributions to IRAs. But if the excess isn’t removed 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 receive only one 2023 Form 1099-R (since you had a loss):

• The return of the excess deferral to the Roth 401(k) will be on Form 1099-R with codes B and P in box 7. Don’t add this amount to your wages on your 2022 return and it can be ignored.

“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.” Please see Pub 525 for additional information.

To report the loss on an excess deferral on your 2023 tax return:

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 reportable income" and click "Start"
6. Answer "Yes" to "Any Other Taxable Income?"
7. Enter "Loss on Excess Deferral Distribution” and enter the loss as a negative number