TurboTax's inability accept the year indication for a make-up contribution under USERRA can occasionally, but rarely cause problems:
- I don't know that a make-up elective deferrals for a prior year qualifies for the Retirement Savings Contributions Credit for the current year. It's unlikely, but possible that entering into TurboTax the make-up contribution for a prior year by omitting the year indication would result in an incorrect calculation of the credit. (In most cases, though, the individual will also have made a current-year contribution that would already have maxed out the credit, so entry or omission of the make-up contribution would not have any effect on the credit.)
- If the prior-year elective deferral is entered by omitting the year indication and the amount happens to be the same as the current-year elective deferral, resulting in two identical code D entries, TurboTax will flag it as an erroneous duplicate entry, preventing e-filing. If the amounts are different, TurboTax will allow 2 code D entries but the W-2 details transmitted with the e-filed tax return will still be incomplete due to the omitted year indication. If the make-up elective deferral entry is omitted entirely, the W-2 details transmitted with the e-filed tax return will be incomplete.
- If the individual enters multiple W-2s that have entries for elective deferrals, enters the prior-year elective deferral by omitting the year indication and the total of code D amounts, including amounts that are make-up elective deferrals, TurboTax is likely to flag an excess elective deferral when none actually exists.
The workaround to any of the three issues indicated above would be to omit the prior-year elective deferral entry and mail the tax return with the W-2(s) attached. If it causes no other problems with the tax return, entering the make-up elective deferral by omitting the year indication would not be expected to cause problems with the IRS since the IRS receives copies of the W-2 prepared by the employer.
Except for any possible effect on the Retirement Savings Contributions Credit, the code D entries have no effect on the calculation of your tax liability. The code D amounts have already been excluded by your employer from the wages shown in box 1 of your W-2, the the code D amounts entered into TurboTax have no effect on your taxable income (except potentially in the case where TurboTax detects what it thinks is an excess elective deferral).
