dmertz
Level 15

Retirement tax questions

You should have received two Forms 1099-R, one with code P for the portion that was the excess contribution and the other with code 8 for the earnings.  Unlike an IRA, the earnings are taxable in the year that the distribution is made, not the year for which the returned contribution was made. 26 U.S. Code § 402(g)(2)(c)(ii)

https://www.law.cornell.edu/uscode/text/26/402#g_2

 

(Prior to the Technical and Miscellaneous Reve­nue Act of 1988, P.L. 100-647 (TAMRA), the earnings were taxable in the year of the deferral, but ever since then the earnings are taxable in the year distributed.  IRS Notice 1989-32)

 

If you inappropriately included the earnings on your 2018 tax return, you'll need to amend your 2018 tax return to remove the earning from income on that return.  If you received a single code 8 2019 Form 1099-R with only the earnings present in box 2a, that should be sufficient to produce correct taxation even if the amount in box 1 includes both the elective deferral and the earnings, although it implies that it was a 2019 excess deferral that was returned rather than a 2018 excess deferral.