DavidD66
Expert Alumni

Retirement tax questions

If you had an excess deferral to a 401(k) in 2019, and the excess was distributed to you in 2020 you must include the excess deferral in your 2019 income (the year of the deferral).  Since the excess was removed before April 15, you do not need to report the income again in 2017.  If you receive it later, you must include it in income in both the year of the deferral and the year you receive it.

You should receive a Form 1099-­R for the year in which the excess deferral is distributed to you. If the distribution was for a 2016 excess deferral, your Form 1099­-R should have the code 8 in box 7. Add the excess deferral amount to your wages on your 2019 tax return.

 

To add the excess deferral to your wages in TurboTax while logged in and working on your return:

  • Click on Search
  • Type “excess salary deferrals“ in the Search Window
  • Click on "Jump to excess salary deferrals"
  • Answer Yes to "Did you receive any other wages? and click Continue
  • On the Wages Earned as a Household Employee screen, Enter nothing and Click Continue.
  • On the Sick or Disability screen, Enter nothing and Click Continue.
  • On the "Any Other Earned Income" screen click Yes to the question: "Did you earn any other wages?"
  • Click Continue
  • On the "Enter Source of Other Earned Income" screen click Other and Click Continue.
  • On the Any Other Earned Income screen, enter a Description such as "2016 Excess 401K Deferrals" Enter the amount returned to you and click Done

Any income on the excess deferral taken out is taxable in the tax year in which you take it out. If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income

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