Excess 401K contribution in 2023 but employer is removing excess funds prior to April 15th.

You cannot rollover an excess contribution to a 401(k).

 

You must include the excess deferral in your wages in the year the excess deferral happened. 

 

Please follow the steps below:

 

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".

 

If you receive the distribution of the excess deferral and earnings by April 15th then please note for the Tax Year 2024 tax filing due April 15, 2025: 

Two 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.