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Retirement tax questions

Whether or not your plan sponsor meets the 4/15/19 deadline, you need to include the excess 401(k) contribution to your wages on your Form 1040, using the instructions below.  

If the plan sponsor is unable to make the distribution by 4/15/19, you will end up paying taxes on the amount twice...first on your 2018 Tax Return and then again when you withdraw the money during retirement.  

You should not make any changes to your W2, it needs to be input exactly as it appears so that the IRS can match the information to your return.

You should report the excess contributions on Line 1 of your 2018 Tax Return by following these steps:

  • Login to your TurboTax Online Account
  • Click "Take Me to My Return"
  • Click "Federal" from the left side of your screen
  • Scroll down to "Less Common Income" and click "Show More"
  • Select "Miscellaneous Income" and click Start or Update
  • Select "Other income not already reported on a Form W-2 or Form 1099" and click on Start
  • Answer the Question "Did you receive any other wages?  Yes
  • Click "Continue" through the questions until you get to "Any Other Earned Income"
  • Answer "Yes" to "Did you earn any other wages?
  • Indicate "Other" as Source of Other Earned Income and click Continue
  • For the description enter "2018 Excess 401K Deferrals" and click on Done

If your Plan Sponsor ends up making the distribution by 4/15/19, you will receive a 2019 Form 1099-R in 2020 showing the refund with a code "P" in box 7 which you can ignore if the excess deferral is reported as suggested above.  However, the earnings will be reported on a separate 2019 Form 1099-R with a Code "8" in Box 7 that should be reported on your 2019 tax return.