How do I submit a 1099-R for 2018 401k excess contribution? Should I select code 8 instead of code P in box 7? If so, turbotax instructions are incorrect (step 4).

[ripclawffb]

My employer made a mistake and I ended up with excess contributions for my 2018 401k. I was told that I'd receive a 1099-R form in 2020 for both the 2018 excess contributions and 2019 earnings on excess deferrals. They indicated that I need include the excess deferral as additional gross income in my 2018 taxes. 

According to turbo tax instructions under "Steps to Take to Remove an Excess Salary Deferral", on step 4 it indicates I should:

4. Report the excess deferral on your 2018 return in the Income section for Retirement Plans and Social Security whether or not you received a Form 1099-R before you file your return. Enter as much information as you can. Report the excess deferral amount in boxes 1 and 2a, and use code P in box 7. Indicate that this is a 2019 Form 1099-R.

However, code P indicates that the excess contributions were for 2017. Should I use code 8 in box 7 instead? If not, how do I indicate that this a 2019 1099-R substitute form?

[macuser_22]

You do not need to wait for a 1099-R next year that will probably require you to amend your 2018 tax return to report the excess on line 7 of your tax return - it can be entered this way and then ignore the 2018 1099-R with a code P in box 7 when it comes.

Excess 401(k) deferrals should be reported in:
(There are several screens to click through to get to the right place)

Miscellionious Income ->
Other Income not reported on a W-2 ->
Other wages (yes) ->
House Hold employee (Continue) ->
Sick Pay (Continue) ->
Other earned income (yes) ->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.

[Note: If there were any earning that were returned in 2019 then the earnings will be reported on a separate 2019 1099-R with a code 8 that goes on your 2019 tax return - do not enter the earnings here.]

This will add the returned excess to your 2018 wages on line 1 exactly the same way that the 1099-R would. The only information that is sent to the IRS is the line 1 amount.

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

[anothermacuser]

You can put the excess contribution amount down as Misc income and label it "excess deferral."  That said, it will not reconcile with the W2s showing excess contributions.  The TurboTax review will show that as an error and not let your proceed with a clean return.  Turbotax needs to somehow have 1099 Misc for excess deferrals offset the excess on the W2s at least for a clean review.

[macuser_22]

@anothermacuser - That is not correct.     Please cite the IRS regulations that permits that.

See IRS Pub 525 that specifies how to report it.

A 1099-MISC is never used for excessive deferrals.

[NOTE: currently there is a TurboTax but that errors on a W-2 with excess box 12 deferrals.  That should be fixed on 4/5/19 but has nothing to do with how to report the excess.]

[anothermacuser]

Clarification:  I meant "Miscellaneous Income ->" down to "Any other income" exactly as you described.  NOT 1099-MISC.  Don't want to mislead anyone.  Glad to hear a 5 April software fix is coming.  This fix is what I'm looking for.  Thanks!

[macuser_22]

Rught - reporting the excess and being able to e-file with the excess in the W-2 are not related to each other.    Reporting the return of the excess is independent of the W-2 bug.

[sahilio1987]

So, I just want to make sure I have this straight.  For a 2018 excess deferral that is distributed before April 15, 2019, I need to include the excess deferral amount on my 2018 taxes as other income through the procedure mentioned above.  I will likely receive a 1099-R in early 2020 for this distribution that took place in 2019.  I will then need to report the distribution of the earnings (or losses) on the excess deferral in my 2019 taxes.  Is this correct?  Do I receive one 1099-R for the deferral itself and and another 1099-R for the earnings (or losses) on that deferral?  And how do I reconcile the 2018 tax return issue with my W-2's?  The total 401k contribution between my two W-2's shows it to be in excess of the IRS limit.  Do I need to manually correct my W-2 inputs to indicate that I have had the excess deferral distributed to prior to April 15, 2019 to avoid the early distribution and exceedance of IRS limit penalties?  

I think I have the first part on how to address the 2018 and 2019 returns correct, but I am not sure what to do about the error that shows up on my W-2's.  Please help!

[macuser_22]

@sahilio1987 -

1) Correct. (It is not actually misc. or other income, that is just the TurboTax interview section -  on the tax return it is added the the 1040 line 1 - wages.)
2) You will get a 2019 1099-R with a code "P" in box 7 for the excess that would need to be entered on an amended 2018 tax return  if not reported now.  You will receive a separate 1009-R withe a code 8 in box 7 that report only the earnings (or loss) that are reported on the 2019 tax return - the year returned.
3) Do NOT change the W-2.  It is reporting what actually happened in 2018. You can't change the past - that is what the 1099-R's are for - to properly report that it was returned.
4) The error on the W-2 is a TurboTax bug that should be fixed by tomorrow night (4/5/19).

[sahilio1987]

Excellent, thank you so much for your help! I've spent the last several days trying to figure this out by reading articles and such, but was still unsure until I came across this thread.  The TurboTax community Q&A's section rocks!

[cjampala]

Thank you very much macuser_22. I have a similar issue and glad to hear that a fix would be available today.

[macuser_22]

I am not at all sure that the update will address this at all.  There was a desktop update yesterday and it did not fix this.

[xueliang-fang]

It is expected to be fixed today, but still can not eFile, very disappointed.

[-southsea]

I see elsewhere that even with the fix, we probably will have to paper-file. But I have the update and I'm not convinced it changed anything. It still reports an error.

[Anonymous]

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4698409-excess-401-k-contribution-preventing-e-file">https://ttlc....>

According to TurboTax, we'll need to paper file.

[1985]

Can someone confirm the update fixed the issue? I did exactly what Turbo Tax recommended for excess contribution in 2018.

1. Requested a 1099-R form from my current 401k plan contributor to fix the excess contribution
2. Received and entered the 1099-R in "Retirement Plans and Social Security" section "IIRA, 401 (k), Pension Plan Withdrawls (1099-R)" where I entered box 7 with "P"
3. As of today (4/7/2019). I still receive the same error on Forms W-2 & W-2G Summary: Elective dferrals - TP $xxxx