Amendment if new W-2 issues and extra 401K is already shown as 1099-R distribution in original return.

[SweetieJean]

Which tax year?

[gaurjune9]

In 2016, my total 401k contribution went to 19135 (i.e. 1135 more than max limit). I showed this extra amount as 1099-R distribution and payed taxes on that. Later I informed my employer and this year in June 2017 they refunded the extra amount but also issued a new W-2 for 2016 and bumped up the wages by 1135 amount. Now I need to know should I file amendment in this case? Even if I do that, my total wages would remain same.

[dmertz · Accepted solution]

Your employer should not have issued a new W-2 for this.  However, the corrected W-2 (showing an increased box 1 amount and a decreased code D amount in box 12) should agree with what was reported on your 2016 tax return since the $1,135 should have been included on line 7, not on Form 1040 line 16 or Form 1040A line 12.

Because the return of contribution was made after April 15, 2017, the distribution of the excess deferral is subject to taxation on your 2017 tax return and amounts to double taxation of the $1,135.  This is effectively the penalty for not receiving the corrective distribution in a timely fashion.  The Form 1099-R should show this as a regular distribution (code 1) and is therefore also subject to a 10% early-distribution penalty.

If the plan mistakenly reports this distribution with code P on the Form 1099-R  instead (signifying that the return of excess was returned before April 15 even though it wasn't), the "corrected" W-2 is wrong since the code P Form 1099-R, reportable on your 2016 tax return, already results in this amount being taxable.  The IRS will see the "corrected" W-2 and expect $1,135 to be added to line 7, but the IRS will also see the code P Form 1099-R and expect another $1,135 to be added to line 7.

[gaurjune9]

In my 2016 return, $1135 has been included in line 7 and not on form 1040 line 16 or Form 1040A line 12.
If this is true, I believe total wages present in 2016 return is correct (and same as corrected W2 issued by employer now) and I don't need to file amendment for year 2016 return. Please let me know if this is correct?

For 2017, I will ensure that 1099-R shows it as a regular distribution (code 1) and not code P.

[dmertz]

Yes, this is correct.

Also double-check on the corrected W-2 that the code D amount in box 12 was reduced by the same amount as the box 1 amount was increased.

[gaurjune9]

Thanks!!
Yes, in new W-2 issued, Code D amount in box 12 has been reduced by the same amount as the box 1 increased.