excessive 457 contribution (401K is similar) roth and tax deferred

[eliassonsr]

I over contributed on my 2019 contribution by 1,000. This was split between Roth and tax deferred. The money was returned plus a gain minus taxes (in February 2020). I entered the tax deferred portion in TurboTax. I Have not received any 1099 in regards to this. I've read the other post and I can't quite figure out the following;

Should the gain go on the 2020 return?

What do I do about the Roth portion?

Will I get a 1099 for 2019 before I have to file my taxes? (i.e. before April 2020).

Do the Gains and federal tax taken out go on the 2020 return? (they were paid in Feb 2020)

[DianeC958]

Yes you can tax the gain on your 2019 return by following the instructions below.

Under Federal Taxes- Wages and Income- Retirement Plans and Social Security- 1099-R:

• Find the custodian's address and EIN (should be easy for large institutions)
• Box 1- the total amount that came out, including the earnings
• Box 2a- the taxable earnings
• Box-7 Enter Code P (and Code J if under 59 1/2).
• After entering the 1099-R, you will be asked for the year of the tax form. You would select 2021. (Code P means taxable in the year before the form.)

You will not receive a 1099-R for the distribution until 2021.

For 2019 you do not want to show the excess contribution since you have removed the excess amount.  If you do you will receive a penalty on your 2019 return for the over contribution.

Since you made the correction in 2020, you'll get a 1099-R with Code P on it next year. Code P will mean taxable in 2019. And you will already have accounted for that. 

[eliassonsr]

Thanks

[macuser_22 · Accepted solution]

@DianeC958 - The poster said that this was a 457 account, not a Roth IRA.  A code "J" only applies if it were a Roth IRA.  If under age 59 1/2 it would be a code "P1"  an a 2020 1099-R being reported in 2019.

Also per the  IRS Pub 525 page 10 states that earnings must be reported in the tax year returned, not the year contributed.  In this case that would be in 2020.   The 2020 1099-R with the code 1P shoukd have 0 (zero) in box 2a and a 2020 1099-R with a code 8 with the earnings in box 1 and 2a should be issued by the account trustee. to be reported on a 2020 tax return next year.

The excess returned (not the earnings) will go on line 7 on the 2019 1040 as a return of wages.

The IRS publication makes that very clear how to report it.
https://www.irs.gov/pub/irs-pdf/p525.pdf