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Employer Over Contribution to a PreTax401k

Hello,

 

I am in a situation where my company did not stop my 401k contributions fast enough in 2023. We contacted them about the error and their response was to not issue us a new w2, cut us a check with the original amount plus the gains for the year before April 15th of 2024, and send us a 1099-R next year in 2025. I want to make sure or ask that in this situation, according the IRS website, we will not be double taxed since we are correcting the situation before April 15, however they state that the money will be counted as income towards the 2024 year. This would be acceptable to me since I obviously need to be taxed on the excess untaxed money however since they will not issue us a new w2, I wanted to know if the best way to report this is file this year with the incorrect W2 and then wait and file next years taxes with the 1099-R or if there is something I need to do now that I don't know about. 

 

Thank you!,

LaLiving32

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1 Reply
DanaB27
Expert Alumni

Employer Over Contribution to a PreTax401k

Yes, you avoided double taxation since you removed the excess deferral before April 15th, 2024. You must include the excess deferral in your wages in the year the excess deferral happened. 


Please follow the steps below to report the excess deferral for 2023 on your 2023 tax return:

 

  1. Login to your TurboTax Account 
  2. Click "Wages & Income" (under Federal) on the left side of your screen
  3. Scroll  down to "Less Common Income" and click "Show More"
  4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
  5. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
  6. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
  7. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
  8. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
  9. On the "Any Other Earned Income" screen enter "2023 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

 

Please note for the Tax Year 2024 tax filing due April 15, 2025: 

 

2024 Forms 1099-R will be issued reporting the excess.

  • Form 1099-R with Code P in box 7 can be ignored if you reported the excess as described above in 2023. 
  • However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2024.

 

Please see Pub 525 for additional information.

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