Hi,
Due to having two employers I overcontributed to 401k. I found out and just requested to correct the distribution. My employer told me that I will receive it will be distributed back, that I will receive 1099R next year, and that they will not issue an amended W2 since no errors were made. All web-sites suggest that I am supposed to receive an amended W2. Can you please verify? Am I supposed to get a corrected W2? If not, how do I report that the excess distribution was done before April 15th and avoid double taxation? thank you
Most times employers will issue a corrected W-2. Some will not, due to the cost. It sounds like your employer is in the latter group.
Regardless, file your taxes correctly, meaning (1) add back the excess 401(k) amount because it was deducted from your wages as a pre-tax deduction and (2) correct W-2 Box 12 Code D amount to show there is no excess contribution (because you fixed it).
Awesome Tax Expert @MinhT1 explains how in Excess 401K contribution and corrected W-2c form
Most times employers will issue a corrected W-2. Some will not, due to the cost. It sounds like your employer is in the latter group.
Regardless, file your taxes correctly, meaning (1) add back the excess 401(k) amount because it was deducted from your wages as a pre-tax deduction and (2) correct W-2 Box 12 Code D amount to show there is no excess contribution (because you fixed it).
Awesome Tax Expert @MinhT1 explains how in Excess 401K contribution and corrected W-2c form
Thank you. Very much appreciate you taking time to explain.
Just contacted them again and they told me that because money are not coming from the company, but from Fidelity which is managing the account, they can not issue W2.
In this case, you will need to adjust your tax return for the excess contributions returned in 2021 from Fidelity.
To do this in TurboTax, follow these steps from @MinhT1, reposted here:
In 2021, the 1099-R will be issued for any earnings that were made on the excess contributions. This will be reported in the 2021 return. For more information, see: 2020 Publication 525: Taxable and Nontaxable Income page 11, middle column.
[Edited 04/17/2021 | 1:11 PM PST]
Thank you.
I have a few follow up questions:
- Why should it say "For the description enter "2019 Excess 401K Deferrals" and click on Done." if the excess of contribution happened in 2020? Also, I received back the excess contribution in 2021, should it still be 2020 Other income?
- The excess returned to me was lower, than originally contributed, because the stock went down. So online it is reported as partially "withdrawn" (X), and partially "change in market value" (Y). So in my manually corrected w2 (my employer is not sending me a new one) I will adjust 401k contribution substracting X and Y, and in the Excess contribution I received back I will state X. Is it correct?
- TurboTax suggests I also fill in 1099R on my own (Fidelity is not sending me a new one till the next year). But your steps do not suggest it. What am I missing?
THANK YOU