Excess Contribution 401K

[pkalra]

I have a question regarding the 2023 1099-R I received from my 401K Plan administrator. 

To give the background of this 1099-R, we had overcontributed to my 401K in the year of 2022. However, I caught the mistake early in the year and I was able to get it out of 401K before the tax deadline. I used the method describing in other posts by @MinhT  as below to fill out the excess contribution when filing for2022 return. 

Below is how to do this in TurboTax:

• Click on Federal in the left-hand column, then on Wages & Income
• Under All Income, scroll down to Less Common Income
• Select Miscellaneous Income and click Start
• Select Other income not already reported on a Form W-2 or Form 1099 and click on Start
• Answer the question "Did you receive any other wages?  Yes
• Click through the questions till you get to Any Other Earned Income
• Answer Yes to Did you earn any other wages?
• Indicate Other as Source of Other Earned Income and click Continue
• For the description enter "2022 Excess 401K Deferrals" and click on Done

Now, I was expecting to get two 1099-Rs for the year of 2023 - one for excess contribution and other for earnings. However, I got only one. I believe it is a combined for excess and earning. It has code E in box 7 and taxable amount in 2a is same as gross distribution in 1. It also shows some Federal and State tax withheld in boxes 4 & 14.

My question is if I enter 1099-R as it is for the year 2023, will I be paying taxes on both earnings and excess? How do I make sure that I will be paying taxes only on the earnings in 2023 (as I already paid taxes in 2022 for the excess amount).

Thanks. 

[DanaB27]

It seems your plan administrator used the Distributions Under Employee Plans Compliance Resolution System (EPCRS). To clarify, the excess contribution to the 401(k) were employee contributions? Does the amount in box 2a include the excess contribution amount? If yes, then you might want to check with your plan administrator.

"For a return of employee contributions (or designated Roth contributions) plus earnings, enter the gross distribution in box 1, the earnings attributable to the employee contributions (or designated Roth contributions) being returned in box 2a, and the employee contributions (or designated Roth contributions) being returned in box 5. Enter Code E in box 7." (Form 1099-R instructions)

[pkalra]

Thanks for your response @DanaB27 !

Yes, this was excess contribution by employee. The total excess contribution was $1375. The plan administrator issued me a check of $1433.59 before Apr 15th deadline of last year. I think this included both excess and earnings.

I was expecting a straightforward 1099-R as I was able to take care of excess contribution in timely fashion, so I didn't pay attention earlier. But now I am stumped by the code E. 

In 1099-R, 

Box 1 is $1433.59

Box 2a is $1433.59 (same as Box 1 and includes everything)

Box 5 is $0.

Fed Tax withheld in Box 4 is $143.36

State Tax withheld in Box 14 is $14.34

I called the plan administrator but they told me to get in touch with the benefits department of my previous employer. I no longer work there so I don't know if I would get any response in time by Monday, Apr 15th. 

If I don't get a clarification, can I modify this 1099-R in TurboTax and file? If so, I will put the difference of $1433.59 & $1375 in Box 2a and $1375 in Box 5. Does this sound right?

[DanaB27]

Yes, if you cannot get a corrected Form 1099-R then you would have to file a substitute Form 1099-R and include Form 4852. 

Yes, you would put the distribution amount of $1,433.59 in box 1, the earnings of $58.59 in box 2a, and $1,375 in box 5.

Another option is to file an extension if your are waiting if they will fix the Form 1099-R. Please see How do I file an IRS tax extension?

[pkalra]

Thanks @DanaB27 for providing additional information. 

I am reading online that returns including Form 4852 can't be e-filed because of IRS regulations. Is that so?

Appreciate your help in clarifying this issue. 

[DanaB27]

Yes, that is correct.

You might want to file an extension with the steps provided in the above mentioned FAQ.