Excess contribution to a 401k no disbursement

Forum|Forum|5 years ago
March 2, 2021
2 replies
18 views

In early 2020 I transferred $2000 into my 401k account with a bank transfer by mistake; the money was intended for another account. I say mistake, because I have already begun my RMD withdrawals from this account, and this account has not been funded since retirement 10 years ago. I did not transfer the amount back because I feared a tax penalty if I did. How do handle this error? Should this excess amount be transferred back? and if so is a penalty involved? My financial advisor declined to answer this tax question.

I am ready to file my 2020 return, but this question lingers.

Patrick

Xjustice1

Level 2

where do I show return of RMD's for 2021

VolvoGirl

Level 15

@Xjustice1 You mean for 2020 on your 2020 return?

Since there is no RMD required for 2020, after you enter the 1099R say it was NOT an RMD and then that you rolled it over (even if back into the same account). Was any withholding taken out? If it was then did you replace the withholding with your own money? Otherwise the withholding will be a taxable distribution itself. You will get credit for the withholding taken out on 1040 line 25b.

If you already entered the 1099-R as RMD and changing your answer to the RMD question doesn't work then you have to delete and renter the 1099-R form.