No, both methods will enter the excess deferral on line 1h of Form 1040.
Once you corrected the excess deferral and included it in your income on line 1h (with either the entry of a 2023 Form 1099-R code P or MinhT's Expert steps) you can ignore the warning in TurboTax. You won't get a penalty calculated for an excess deferral.
If you receive the distribution of the excess deferral and earnings by April 15th then please note for the Tax Year 2023 tax filing due April 15, 2024:
Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2022.
The loss will have to be reported on your 2023 tax return:
- Login to your TurboTax Account
- Click "Federal" from the left side of your screen
- Scroll down to "Less Common Income" and click "Show More"
- Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
- Select "Other reportable income" and click "Start"
- Answer "Yes" to "Any Other Taxable Income?"
- Enter "Loss on Excess Deferral Distribution” and enter the loss as a negative number
Please see Pub 525 for additional information.
@MK1947
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