You will be taxed on the excess 401K contribution in 2025. You must still report the excess as income in the year it happened, and enter the 1099-R in the year you receive it.
- Report as Income: Go to Wages & Income > Less Common Income > Miscellaneous Income, 1099-A, 1099-C > Start.
- Add Income: Select Other income not already reported on a Form W-2 or Form 1099 > Start.
- Answer Questions: Answer "Yes" to "Did you receive any other wages?" and continue to "Any other earned income".
- Enter Details: Enter a description like "2025 Excess 401(k) Deferrals" and the amount
When you receive a 1099-R in 2026 it should have code P in box 7. This makes the amount non-taxable on your 2026 return because it was already taxed in the previous year (except any earnings added).
@Joearby
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