Both companies returned "excess contributions" for 401k

[nuggetcocoa]

In 2021 I worked for two companies, company A and company B. I over contributed to my 401k and I needed to get the excess contributions returned from one of the companies (but not both). However, due to miscommunication, BOTH companies returned excess contributions (for example, $2000 from company A and $3000 from company B). Now, my 401k is no longer maxed out for 2021 and I have to pay tax penalty on both ($5000) instead of just the excess contribution from one company. Is there any way to "undo" the return of excess contribution from one of the companies?

Thanks

[Critter-3]

What a mess ... did you try talking to those companies to see what they can (or will ) do for you after the fact ? 

[Opus 17]

You don't have to pay a penalty, you just have to pay income tax. 

Were the funds returned by direct deposit or by paper check?  If by check, did you cash the checks?

I am not aware of any legal method to cancel a corrective distribution once you have taken it, and certainly not after April 18.  If you got paper checks and have not deposited or cashed them, you might be able to contact one trustee and tell them you want to tear up the check and void the request.  But if you have received the funds, I think you are stuck with the mistake. 

[nuggetcocoa]

They were by returned by paper check and I did not cash either of the checks yet. However, both companies have each already issued a 1099-R for the return of the excess contribution. Since both companies removed this extra money from my 401k in 2022, don't I have to pay a penalty for both "excess contributions" that were returned to me? (even though in theory, only one of them was in excess of the 401k contribution limit)

Thanks

[macuser_22]

---

@nuggetcocoa wrote:

They were by returned by paper check and I did not cash either of the checks yet. However, both companies have each already issued a 1099-R for the return of the excess contribution. Since both companies removed this extra money from my 401k in 2022, don't I have to pay a penalty for both "excess contributions" that were returned to me? (even though in theory, only one of them was in excess of the 401k contribution limit)

Thanks

---

What code is in box 7 of the 1099-R"s ?

And it does not matter if you cashed the check or not since you have constructive receipt of the money.

There is no penalty but you do have to report it as income on line 1 (wages) on yout1040 form since the employer did not include in in your W-2 taxable income so you must pay the normal tax on it.

[nuggetcocoa]

IRS code P in box 7 for both 1099-Rs

[macuser_22]

That good and what it should be.  Just report that on your 2021 tax return (or amended tax return if you already filed).   Code P will ask if it is a 2021 or 2022 1099-R so say 2022.