Error Nonqualfied payments can not be higher than the wages reported in Box 1.

[jfrussell]

Error Nonqualified payments can not be higher than the wages reported in Box 1. The difference between the Box 1 and Box 11 amounts is 401k withheld.   Answering the subsequent question "Did you take money out of your nonqualified plan" with a Yes created a negative amount on Line 1 of the 1040.  Seems logical  that the answer should be Yes.

Should Turbotax be taking into consideration the 401K deduction?

The error notice notes to consult with the issuer of the W-2.  Are there rules in place to not allow a 41k deduction from a nonqualified plan payment? Retired in 2022 and the only payment received in 2023 was for the nonqualified plan.

Should box 11 be the net amount of the payment rather than the gross?

How should the w-2 be updated if necessary?

Thank you!

[dmertz]

"Are there rules in place to not allow a 401k deduction from a nonqualified plan payment?"

Yes.  A distribution from a nonqualified deferred compensation plan is not permitted to be deferred to a 401(k).

[jfrussell]

Thank you for your reply! 

Reached out to my old employer and additional information was provided.  The nonqualified plan was a 409a plan.  Could you provide  more information on the rule in place to not permit the 401k deduction if that is still applicable?

Also wants confirmation that this question was answered correctly.

Did you take any money out of your nonqualified pension plan?   We just want to check whether the amount in Box 11 is money you contributed to you plan, or if it is money you took out of your plan.

Checked 1; Yes I took money out of my nonqualified plan  or Section 457 plan.

Does the fact that is is a 409a plan change the answer?  Employer made a payment to me for the nonqualified plan.

Would additional details be helpful?

Thank you!

[dmertz]

Section 415(c)(1)(B) limits contributions to 100% of the participant's compensation.

Section 415(c)(3)(A) defines the participant's compensation as the compensation of the participant from the employer for the year.

Deferred compensation is not compensation for the year.  Compensation for the year is only the amount by which box 1 would exceed box 11 without any 401(k) contribution.

409(a) = Nonqualified deferred compensation plan.

[jfrussell]

Hello again.

I reached out to former employer and got their acknowledgment that 401k should not have been deducted.   The solution is to have the 401k provider issue a check for the contribution and issue a 1099R for 2024.  

A corrected W-2 is not looking likely.  With that in mind I stared to look at the community topics.

I found on the online community forum a solution for excess contributions from minhT1 back on 4/17/2021 that provides steps how to add as Other Earned Income in Turbo Tax {2023 Excess 401k Deferral}.  Most of this made sense except the box to check  to correct the amount on the W-2.   If Box 12 is adjusted to zero there is still the error that Box 11 is still higher than Box 1.  Do I also adjust Box 11 to Box 1 amount?

Adding the Other Income updated the tax amount to the expected amount.

Thank you for your assistance!

[dmertz]

I would probably enter a substitute W-2 (Form 4852) by removing the amount shown with code D in box 12 and adding that amount to the amount shown in box 1.  Form 4852 allows (requires) you to provide an explanation.