Can I correct an excess distribution from a 403B is it is re-deposited to the retirement account in the following year?

[pastordavidowen]

My plan did an erroneous double distribution in Sept. 2025 and reverse the second transaction in Jan. 2026 (re-deposited to the 403b plan). Is there any way I can re-balance this when I file taxes?

[MinhT1]

Report excess salary deferrals (excess 403b contributions) returned to you after the end of the tax year but by April 15th of the following tax year on your 1040 as Wages.  Do not create your own 1099-R for this situation.

Page 10 of IRS Pub 525 under Excess deferrals (the IRS term for 401K contribution is deferral) tells us: 

If your deferrals exceed the limit, you must notify your plan by the date required by the plan. If the plan permits, the excess amount will be distributed to you. If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. The plan must then pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. You must include the excess deferral in your income for the year of the deferral. File Form 1040 or 1040-SR to add the excess deferral amount to earned income on line 1h.

What you earned on the excess contribution will be covered by a 1099-R for the following tax year and will be entered then as a normal 1099-R.

Below is how to do this in TurboTax Online:

1. Click on Federal in the left-hand column, then on Wages & Income
2. Navigate to the list of income categories
3. Locate the section Less Common Income
4. Select Miscellaneous Income and click Start
5. Select Other income not already reported on a Form W-2 or Form 1099 and click on Start
6. Answer the question "Did you receive any other wages?  Yes
7. Click through the questions till you get to Any Other Earned Income
8. Answer Yes to Did you earn any other wages?
9. Indicate Other as Source of Other Earned Income and click Continue
10. For the description enter "2024 Excess 403b Deferrals" and click on Done

[dmertz]

If the excess distribution is included on your Form 1099-R, it seems that the 403(b) allows a late rollover under IRS Rev. Proc. 2020-46 self-certification that the rollover of this amount would qualify for a waiver of the 60-day rollover deadline due to financial-institution error.  Under these circumstances, you would report on your tax return that the redeposited amount was rolled over.  If this was a related to the distribution of an RMD, when TurboTax asks how much was RMD, indicate only the amount of the actual RMD.  (The portion distributed in excess of your actual RMD was not an RMD.)

[pastordavidowen]

I am a little confused about using the word "Rollover" here because two directions are involved.

1. in Early Sept. they distributed my RMD amount from my 403b into my short term checking account

2. They then made a a second distribution of the same amount as the first, 4 days later (an error)

3. After months of begging them to reverse the second transaction, they did that, but in January 2026. They took that whole amount out of my short term checking account and redeposited it into my 403b.

The net effect was to boost my 2025 income by over $30,500 in Sept. 2025, and then decimate my checking account in January with a direct transfer from it into the 403b account.

So my 1099R for 2025 includes the extra amount although it has since been reversed transferred into the 403b.

So I think I kind of get the idea of not including the whole 1099R but only the RMD and designating as W2 but not quite understanding.  Can you give me more specifics?  (by the way it will have to be an amended return at this point.)

Thanks so much for your help, both of you,

Dave Owen

[pastordavidowen]

So we are not talking about excess deferrals, we are talking about an excess distribution. Does that make sense

[dmertz · Accepted solution]

MinhT1's reply does not apply.

As I understand it, the Form 1099-R shows a gross distribution of ~$61,000, of which ~$30,500 was RMD.  Enter this Form 1099-R as received, indicate that your required distribution was ~$30,500, that ~$30,500 of the distribution was RMD, that you moved the funds to another retirement account or back to the same account and that you rolled over the ~$30,500 that was not RMD.  The full ~$61,000 will appear on Form 1040 line 5a but only the taxable amount will appear on line 5b.  The Rollover box on line 5c will be marked.

[pastordavidowen]

Thank you so much. I assume it's ok that the transfer back in was made in January?

[dmertz]

As I mentioned previously, because the rollover deposit was made more than 60 days after the distribution, for the plan to allow the rollover to be completed you would have had to have made, and the plan accepted, you self-certification under IRS Rev. Proc. 2020-46 that this rollover would qualify due to financial-institution (plan) error for a waiver of the 60-day rollover deadline.  Since they accepted the rollover, this self-certification was apparently satisfied.