414(h) employee contributions in W-2 Box 12 Code D

[CjzVWqHmUDRYG7nm]

My wife has access to the TCRS K-12 Legacy plan which seems to be categorized as a 414(h) under the IRS code. Last year and this year, her mandated employee contributions to this plan were included in Box 12 Code D on her W-2 which seems to be only for 401(k) contributions. For 6 years prior to 2018, where she also qualified for this plan, her mandated contributions were not reported in Box 12 Code D but in Box 14 instead.

In 2019, she also had access to a 401(k) which she maxed out. So, her 2019 W-2 has ~$22,000 in Box 12 Code D [$19k 401(k) + ~$3k TCRS]. TurboTax throws a warning because this is greater than the expected max.

Her payroll department has been researching this for several weeks, but does this seem like an error? Should these 414(h) contributions appear in Box 12?

If we are not able to get a revised W-2, how should we address this on our tax return?

Thanks.

[SteamTrain · Accepted solution]

Last year (2018) sounds like a major foul-up if 414(h) were listed as box 12 code D.  You may have to amend 2018 taxes if/and/when they issue a corrected W-2 for 2018   (And pay some back to the Feds)

I  "think" they really need to get their W-2 reporting in order.   414(h) contributions should only be in box 14.

 I don't know if there would ever be a way to clear this year thru the software, other than the employer issuing a corrected W-2.  They need to fix their W-2 (with a W-2C) before you can file.  if they delay too long, you may need to file an extension to give them more time to get it fixed.   (When a W-2C is issued, it usually just shows the boxes that it fixes, and you just edit the main W-2 to include those fixed boxes).

@dmertz      Does this sound about right?

[dmertz]

Yes, SteamTrain, your response sounds right.  The instructions for box 12 explicitly state that 414(h) contributions are not be included in box 12 but are to be included in box 14 as information to the employee:

"Do not report in box 12 section 414(h)(2) contributions (relating to certain state or local government plans)."

Code D is only for 401(k) contributions.  414(h) applies only to 403(b) contributions.  If the 403(b) contributions were not picked-up by the state under 414(h) they would be reported with code E, not code D.

Is it possible that the employer mistakenly deposited the 403(b) contributions into the 401(k) instead?

[CjzVWqHmUDRYG7nm]

Thanks.

I don't think the TCRS K-12 Legacy plan has a 403(b). I think (I am not a tax professional) it is a 414(h) pension with a 401(k) option. Employee contributions to the pension are mandated at 5% of salary. 2019 was the first year she elected to use the 401(k) (mostly because we didn't realize it was an option).

So, I don't think any funds were sent to a 401(k) in 2018. Only the 5% to the 414(h) pension in 2018.

In 2019, we saw the $19k land in her new 401(k) account as well as the 5% land in her pension account.

[CjzVWqHmUDRYG7nm]

Thanks, this is what I was suspecting from my research, but wanted to get more feedback. I appreciate it.

[CjzVWqHmUDRYG7nm]

@dmertz, Hmm, when I change the Box 12 Code D amount on the 2019 W-2 to exclude the 414(h) contributions and only include the ~19k 401(k) contributions (won't file that way, just testing to see what happens if I do get a corrected W-2), the amount of federal tax due stays the same. Is this to be expected? Maybe one of the top-line boxes on the W-2 is also incorrect?

[dmertz]

Yes, that is to be expected.  The reduction in taxable income is the result of the employer excluding the code D amount (and the 414(h) amount) from box 1 of the W-2, not from any deduction taken on your tax return.  Also, there is no penalty for an excess contribution to remove.  Had you actually made an excess contribution that went uncorrected you would have to explicity add the excess amount as miscellaneous income.

[SteamTrain]

(edited out....I may be off on the details here)

[CjzVWqHmUDRYG7nm]

@dmertz& @SteamTrain ya'll are awesome. thanks for all your help!

[dmertz]

SteamTrain, I believe that the 414(h) contribution is to be excluded from the amount in box 1 of the W-2.  It would only get added back to the box 1 amount as part of the correction to the W-2 if the employer originally excluded the 414(h) amount twice, once correctly as the 414(h) amount to the 403(b) and erroneously a second time as part of the amount reported with code D in box 12.

[SteamTrain]

@dmertz 

You are far better at the details on those things than I .

..... I'd better remove myself from this as I truly am hazy about some of the gory details, and I've never really ahd experience with 403b's or 457's either.