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taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

Hello,

I need some assistance here.   I am working on my 2020 tax return. In the beginning of 2020, I was notified that I exceeded my allowable 401k contributions that was based from my 2019 contributions.  There are calling it 401K excess contributions.  The company handling our company retirement fund, did say that I will receive a 1099-R in 2020 which I did and I want to make sure I am handling the entry correctly.  In 2019 I was 55 and in 2020 I was 56. I am not sure if you need to know my age but I figure I would supply it.

 

Recap - the 401K excess contributions was based off of my 2019 income however the money was paid back to me in the beginning of 2020.  Now the 1099-R shows the following:

Box 1: $3666.49
Box 2a: $3666.49
Box 4: $733.30 (Federal Withholding)

Box 7: Code 8

 

First question is on my 2020, I should report the $3666.49 on my wages line correct? So the amount will be on my Form 1040 Line 1 - Wages Salaries etc, Correct?

 

Second question: The net result from the 1099-R I received was $2933.19 and I put that in a  Edward Jones Traditional IRA account.  I received my statement from Edward Jones and it shows the $2933 as a contribution in 2019.  Now I did not put that $2933 on my 2019 return on Form 8606 because I honestly thought that it would get reported on my 2020 Form 8606.  Due to my income earnings and the fact that I am covered in a 401K at work, my understanding is that the $2933 would be considered a Non Deductible Contribution.  Should I have reported this on my 2019 Form 8606? If the answer is YES and I did not, can I add the amount to my 2020 Form 8606 on line 2 Your Total Basis in Traditional IRAs

 

And I have the same situation for 2020. and I make sure I report it correctly this year.  In the beginning of 2021, I received noticed that again I over contributed to my 401K (401K excess contribution).  The money I received back I contributed $4500 to the same Edward Jones  Traditional IRA account the $2933 went into and I put 2500 into Edward Jones ROTH account.  If I made a mistake on my 2019 by not reporting my nonductible contributions I want to make it right on my 2020.  My statement from Edward Jones show for 2020 IRA contribution of $4500.  Again with my income earnings and already participating in a employer based 401K, will I enter the $4500 as a nondeductible contribution for 2020 on line 1 of Form 8606? 

 

If I did it correctly

Form 8606 would look like this

Part I

Line 1: $4500

Line 2: $2933 (last years contribution 2019)

Line 3: $7433 (adding lines 1 and line 2)

Line 6: $2933 (enter the value of all your traditional, SEP, etc as of December 31, 2020.

 

Lastly, Since I also contributed to a NEW ROTH Account, that does not get reported on Form 8606 correct?

And when the company issues me a 2021 1099-R next year for the excess 401k contributions, I would again have it added to my Wages Line correct?

 

 

Thank you in advance for your assistance.

LF

 

 

 

 

12 Replies
macuser_22
Level 15

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

Just enter the 1099-R as it is and it will go on the 1040 line 1.

 

You need to amend 2019 and enter the 2019 Traditional IRA contribution and make it non-deductible if that is what you want or your incime is too high to deduct.   That will add a 2018 8606 with the contribution on lines 1,3 and 14.

 

The 2020 8606 line 6 will be blank if you did not have any 2020 distributions and line 14 will be the same as line 3.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

Thanks for responding Macuser_22.


Let me clarify:

 

1. I will enter the 1099-R on the 2020 tax return and it will appear income under Wages - got it!

2. Amend the 2019 and add $2933 as nondeductible contribution and mail it in the IRS. - got it!  Do know if I have to send in the entire tax return or just the Form 8606?

 

Now for the 2020 tax year, I again had 401K excess contribution of $4500 that they paid back to me in March of 2021 and I put that into the same Traditional IRA account.  Since my income is over the limit and I am covered on 401K work, wouldnt I include the $4500 on the 2020 Form 8606 line 1 as nondeductible contribution?

 

Thanks again for taking the time to answer my question and my follow up questions.

macuser_22
Level 15

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019


@taxgal428 wrote:

  Do know if I have to send in the entire tax return or just the Form 8606?

 

Now for the 2020 tax year, I again had 401K excess contribution of $4500 that they paid back to me in March of 2021 and I put that into the same Traditional IRA account.  Since my income is over the limit and I am covered on 401K work, wouldnt I include the $4500 on the 2020 Form 8606 line 1 as nondeductible contribution?

 


You mail the 1040X and 8606 if that is all that changed.

 

A 2020 excess returned in 2021 will be reported on a 1099-R with a box 7 code P taxable in the year contributed.   You should also get a 1099-R with code 8 for any earnings that were returned -  that is taxable in the year returned.

 

If you made a 2020 non-deductible Traditional IRA contribution then it is reported on line 1 of a 2020 8606 form.

 

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

Recap

1. mail in 1040X with Form 8606 - got it!

 

2. What's confusing is the code P and 8.  I never received a 1099-R with a code P in box 7, just a code 8 in box 7 for 2020.  Just want to make sure that I read the publications correctly and your responses correctly - the 2019 excess 401k contribution that was returned to me in 2020  is taxable in year I received it back so in this case, I received the 1099-R for with code 8 in box 7, I report that income on my 2020 tax return - Correct?  And since the excess 401K was returned to me before the due date  April 15 2020  (later due to covid) and I opened an Traditional IRA with in March of 2020 it will still be considered listed as a  nondeductible contribution on my 2019 tax return - CORRECT? 

 

That is why Edward Jones shows  Tax Year 2019 Traditional IRA Contribution of $2933 because I opened up the account before the Tax deadline due date in 2020 - CORRECT?

 

3.  I don't think I worded my last question probably.  In regards to the 401K excess contribution that was made in 2020 was returned to me  in March of 2021.  Like I mentioned earlier, the excess amount I placed into my traditional IRA that I opened earlier, so do I report that nondeducitble contribution on my Form 8606 for 2020 because they returned back to me before the filing date of  April 15, 2021 or May 17, 2021 (not sure if they extended their deadlines on that? ). My Edward Jone statement shows 2020 IRA Contribution of $4500 .

 

And in 2022 when I receive the 1099-R for 2021 with Box 7 code 8, that $4500 will be included on my 2021 tax return as income because that is the year it was returned to me -  CORRECT?

 

Hopefully these are last questions for ya. I am truly sorry, please be patient with me. I am trying to read the publications and comprehend what they saying and also what you are saying as well. I just don't like to have answer and be done with it.   I wanna make sure I good understanding of it.

 

Thanks 

Lisa

macuser_22
Level 15

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

It can be confusing.

 

A excess made *for* 2019 that is returned *in* 2019 would have a code 8.   A excess made *for* 2019 that is returned *in* 2020 would have a code P.  It is taxable for the tax year in which the contribution was made, not they year returned.   Any earnings are taxable in the year returned.

 

(Code P means taxable in the previous year.   Code 8 means taxable in the current year.)

 

For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf

 

[quote]

If the distribution was for a 2020 excess deferral, your Form 1099-R should have code 8 in box 7. Add the excess deferral amount to your wages on your 2020 tax re-turn.

If the distribution was for a 2020 excess deferral to a designated Roth account, your Form 1099-R should have codes B and 8 in box 7. Don’t add this amount to your wages on your 2020 return.

If the distribution was for a 2019 excess deferral, your Form 1099-R should have code P in box 7. If you didn't add the excess deferral amount to your wages on your 2019 tax return, you must file an amended return on Form 1040-X. If you didn't receive the distribution by April 15, 2020, you must also add it to your wages on your 2020 tax return.

If the distribution was for the income earned on an excess deferral, your Form 1099-R should have code 8 in box 7. Add the income amount to your wages on your 2020 income tax return, regardless of when the excess deferral was made

[end quote]

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

That is the publication and page I have been reading.  I swear I will get this. I am determined.

 

A excess made *for* 2019 that is returned *in* 2019 would have a code 8.  That is what I have however its on the 2020 - 1099-R Box 7 code 8 and their letter said it was for the 2019 401K excess contribution .   What date is used  for "returned *in* 2019"  by -  to determine the code P or code 8.  Do they go by December 31, 2019 it has to be returned to me OR April 15, 2020 by the 2019 filing deadline? And I never received anything in the current or past with a code P.

 

 

macuser_22
Level 15

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019


@taxgal428 wrote:

That is the publication and page I have been reading.  I swear I will get this. I am determined.

 

A excess made *for* 2019 that is returned *in* 2019 would have a code 8.  That is what I have however its on the 2020 - 1099-R Box 7 code 8 and their letter said it was for the 2019 401K excess contribution .   What date is used  for "returned *in* 2019"  by -  to determine the code P or code 8.  Do they go by December 31, 2019 it has to be returned to me OR April 15, 2020 by the 2019 filing deadline? And I never received anything in the current or past with a code P.

 

 


Any contribution in 2019 before Dec 31 is a 2019 contribution.    If returned in 2020 the 1099-R should have a code P.   It must be returned by April 15 of 2020 to be returned at all.     The insurer of the 1099-R did not follow IRS regulations. 

 

The code 8 1099-R says that the excess occurred in 2020, not 2019.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

Ok so the insurer messed up with the codes and I highly doubt they will correct it.

So I will include on my 2020 1099-R  so the amount of $3666 will be added to the Wage/Salary line 1 of the 1040.

Now since I included it in my wages on my 2020 tax return, I don't have to amend the 2019 to add the $2933 to the wages again correct? I only have to amend 2019 to include the nondeductible contribution of the $2933 which is from 1099-R that issued to me in 2020 difference of $3666 gross amount - 733 federal withholding), because Edward Jones shows the IRA contribution was made in 2019 when I look back at my activity. 

 

Now for my 2020 401K excess contribution.  They issued me the money earlier this year in 2021 for $4500 and I put that in my IRA as well the same one I opened with the $2933.  Since the contribution was made in 2020 and yes I am over the income limit and have a 401K with work, I would add the $4500 nondeductible contribution to my 2020 Form 8606 correct? And next year when they send the 1099-R with the code 8 which I am assuming, I will add that to my 2021 income under wages correct?

 

If am wrong with what I wrote above, what would your suggestion be... Again, I will not hold you accountible for anything. I would like to see how someone would handle this if it was them. Again just curious.

 

This is now becoming frustrating,  but I am very grateful for all your assitance.

 

With your expertise how important are these Form 8606? Do people really files these form.  From my understanding you have too because you can penalized.  Just curious.

 

macuser_22
Level 15

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

It is probably easier to just enter the 1099-R rather than argue with them that they are wrong.  As long as you tax return matches what they sent the IRS will probably not care.

 

IRA contributions are totally separate.  If non-deductible then it will go on a 8606 form line 1.

 

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR  Use the "Tools" menu  (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

thanks for all your help.

 

Last question - In 2020 I rolled over a ROTH IRA from Schwab to a ROTH IRA at Edward Jones, should I have received the 1099-R showing the rollover showing with a code G in box 7 and do I have to enter that anywhere on Form 8606 for ROTH IRA rollovers or do they consider it ROTH IRA conversion from one ROTH IRA to another ROTH IRA and would that appear on Form 8606?

 

One thing I know is that there is no tax deduction for ROTH IRA contributions - yeah me - I may have at least got one thing right LOL!

 

Lisa

macuser_22
Level 15

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019


@taxgal428 wrote:

thanks for all your help.

 

Last question - In 2020 I rolled over a ROTH IRA from Schwab to a ROTH IRA at Edward Jones, should I have received the 1099-R showing the rollover showing with a code G in box 7 and do I have to enter that anywhere on Form 8606 for ROTH IRA rollovers or do they consider it ROTH IRA conversion from one ROTH IRA to another ROTH IRA and would that appear on Form 8606?

 

 


A trustee-to-trustee transfer (not a rollover) where you never saw the money, does not generate a 1099-R but some financial institutions issue one anyway.   No 8606 is involved for a change of trustee.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
taxgal428
Level 1

Form 1099-R Box 7 Code 8 for tax year 2020 - Excess 401K contributions from 2019

thank you macuser_22!  you have been a great help!  

 

take care and I hope to use your knowledge in possible future tax questions.

 

Have a great year and continue to stay safe and healthy!

 

Lisa

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