How to claim credit for already paid 1099-R in last year tax return

[TahaTax2018]

Hi,

End of 2021 I received corrected 1099-R that I did over contribute into 401K at 2020. At that time I was. with different employer and  I rolled over my older 401k [Over contributed] to new employer's one. I filed that amount  at 1099-R as taxable income for 2021. Them I noticed I need to work with new employer 401K to refund that excess amount. After a long discussion, they [New employer] processed it and refunded money base don their calcualtion and issued new 1099-R for 2022. But, the taxable income at 1099-R was less that what I did enter in 2021 [The reason was stock market fluctuations] and also they deducted taxes, then the check I did received had taxable amount as income with already federal and state tax deducted. Now, wondering how I can claim credit for excess payment I did in 2021 as it is bigger than what I have received in 2022.

Appreciate if anyone can help me. 

[dmertz]

[Edit:  Disregard this reply.  I failed to recognize that the excess contribution was for 2020, not 2021.]

In addition to the excess deferral amount (not the adjusted amount distributed) being reportable on your 2021 (adding to your taxable income for 2021 but not giving you credit for the tax withholding), the code-P Form 1099-R must be entered into 2022 TurboTax,  giving you credit for the tax withholding but will not be added to your 2022 taxable income.

[TahaTax2018]

Thanks for response, Can please help me on how I can enter this code in turbotax online this year?

Will also adjust before tax deferral difference between what I reported in 2021 and 2022?

[dmertz]

In 2022 TurboTax

1. Wages & Income -> IRA, 401(k), Pension Plan Withdrawals (1099-R)
2. Enter the details from the code-P 2022 Form 1099-R
3. When TurboTax asks, indicating that it is a 2022 Form 1099-R, not a 2023 Form 1099-R

2022 TurboTax will credit on Form 1040 line 25b the withholding shown in box 4 of this Form 1099-R and will ignore the taxable amount shown in box 2a.

[TahaTax2018]

Thanks a lot! I followed procedure and got some refund. Just to double check, 2021 Box 7 code is "8" that I filed in 2021. New 1099-R I received at 2022 has Box 7 code "E". But, when I filed this 1099-R in turbo tax now as you guided, I did enter Code "P" in this box. 

is is correct?

Also, it asks for amending, wondering as I filed 2021 with same Turbotax product, Turbotax automatically will amend it.

[dmertz]

I think I misunderstood the circumstances.  As I understand it now, the excess contribution was for 2020 but was not corrected until 2022.  In that case, you are indeed subject to double taxation on the excess, once on your 2020 tax return and again on your 2022 tax return by reporting the code-E 2022 Form 1099-R.

Disregard everything I previously said about this 2022 Form 1099-R not being taxable on your 2022 tax return.  Double taxation is the penalty for not having received the corrective distribution by April 1, 2021.

[TahaTax2018]

Then, I should not take any action and not enter 2022 1099-R and cannot deduct extra tax paid through Fidelity or I need to follow another procedure? Appreciate any response.

[dmertz]

You must enter the code-E 2022 Form 1099-R into 2022 TurboTax, pay the tax and get credit for the tax withholding.

If there was no excess contribution made in 2021 and there was no distribution made in 2021, nothing about this should have been on your 2021 tax return.  You probably need to amend your 2021 tax return to remove the anticipated code-P 2022 Form 1099-R that you entered there.

I think  this is what needs to happen, but I may still be a bit unclear on the sequence of events.  I don't think I understand what Form 1099-R was received at the end of 2021.

[TahaTax2018]

Thanks again, The one received at 2021 was for over contribution that was done at 2020. The first company notice the mistake late and because of it this timing issue happened. All this is part of rollover that was done in 2021 from old employer  that made mistake and to Fidelity and then contribution on this one was not done anymore as it was rolll over money.

When I updated code  to E my refund decreased as expected. Now, How I can tell Turbo tax that I paid it already in 2021 with more and this one also deducted income tax when issued to get credit back? Really appreciate your help!

[TahaTax2018]

Can I go amend Tax2021 with update of  deleting initial corrected 1099-R  and then adding new 1099-R as it is to 2022 tax return?

[dmertz]

I don't think so.  I think you need a CPA to review everything.