Hi,
I am in a slightly odd situation with excess 401K contribution and withdraw that I'm hoping I can get some advice.
In 2023, one of us over contributed to 401(K) and Roth 401(K) due to changing jobs, say total over contribution was $3500. In 2024 tax season, we discovered the over contribution on the regular 401(K) side ($2000), but missed the over contribution on the Roth 401(K) side by $1500. We requested custodian and withdrew the $2000 excess contribution in 2024 season, and received $2300 total ($2000 + $300 earnings) in 2024.
In the 2023 tax return filed by April 15 2024, we reported income unreported on W2 due to excess contribution of $2300 - I didn't understand if I should have included the earnings, so I did.
In April of 2024, we discovered the excess Roth 401(K) contribution, and tried to withdraw that also. However, the custodian couldn't process anymore as excess contribution withdraw. By June of 2024, we withdrew the $1500 from Roth 401(K).
I have a few questions regarding the different portions:
1) For the $2300 that we reported as income in 2023 tax return, we received 1099-R with code P for $2000, and 1099-R with code 8 for $300 as the earnings. Based on reading many answers here, it appears that I can ignore the 1099-R with code P, but should include 1099-R with code 8 in my 2024 tax return. Is this correct, or can I also ignore the $300 1099-R with code 8 since I had already reported in 2023 return?
2) For the $1500 Roth 401(K) withdraw, we also received a 1099-R with code 1 (ordinary distribution), and it indicated that $1400 was the Roth contribution, and $100 is earnings, and taxable portion is the $100. How should I treat this 1099-R? Do I just file it as it is? Is there something I also need to do to further correct the 2023 excess contribution while seems like I'm still $100 over contributed.
My priority is to try to follow the tax code as closely as possible to avoid any problems that might trigger audit, and I'm less concerned about the small penalty tax that I might end up paying. Turbotax unfortunately wasn't very clear and didn't provide alerts when I over reported the income in 2023. I appreciate someone with some experience in this area for insights.
