My employer messed up and deferred too much into my 401k in 2022. I included that excess amount as income on my 2022 tax return (and received in April 2023 a refund of the excess from the 401k folks). Now I received a 1099-R for that same excess amount with Code 8 in Box 7, which appears as additional income on my 2023 tax return.
How do I avoid paying double tax on that? I asked if the 1099-R box 7 should really have been code P, but the 401k person I spoke with didn't know much. Help!
Only any earnings required to accompany the distribution of the excess should be present in box 2a of a code-8 2023 Form 1099-R even if the this form shows the entire amount in box 1. The excess amount itself was only taxable on your 2022 tax return. and should not be present in box 2a of the code-8 Form 1099-R.
For others....
I spoke to an IRS agent and they said this: Box 7 of the 1099-R should indeed have been code "P." And no double taxation should occur so long as the excess was distributed before April 15, 2023 (and it was indeed taxable on 2022 return). I should ask the 401k provider to send a corrected 1099-R. If they don't, I should contact the IRS again and they will write a letter to the 401k provider asking, pretty-please, to do so. (I assume they'd do it at that point, but if not, the next steps are unknown to me at this time.)
Only any earnings required to accompany the distribution of the excess should be present in box 2a of a code-8 2023 Form 1099-R even if the this form shows the entire amount in box 1. The excess amount itself was only taxable on your 2022 tax return. and should not be present in box 2a of the code-8 Form 1099-R.
So... do I just beg the 401k provider to issue a corrected 1099-R??
If they refuse, I probably cannot just leave it off my 2023 return, since it will appear to the IRS that I missed some income they see on the (erroneous) 1099-R they get from the 401k provider.
Then what?
If the Form 1099-R is wrong, you can submit a substitute Form 1099-R (Form4852) with what you believe to be the correct amounts with explanation.
For others....
I spoke to an IRS agent and they said this: Box 7 of the 1099-R should indeed have been code "P." And no double taxation should occur so long as the excess was distributed before April 15, 2023 (and it was indeed taxable on 2022 return). I should ask the 401k provider to send a corrected 1099-R. If they don't, I should contact the IRS again and they will write a letter to the 401k provider asking, pretty-please, to do so. (I assume they'd do it at that point, but if not, the next steps are unknown to me at this time.)