I got a refund for my 2016 401k contribution but the 1099-R will not be printed until next year. How do I report the pre-tax deferrals in my 2016 tax return?

[yijiachen]

The letter that came with my refund check says that the refund is taxable for 2016 so I need to report it in my gross income (Line 7) but I'm not sure how to do this with Turbo Tax deluxe. Please help thanks.

[macuser_22 · Accepted solution]

If this was a refund of excess deferrals then it will be reported  on a 1099-R that you will receive in 2018, but must be reported on your 2016 tax return on line 7 as you know.

You do not need to wait for a 1099-R next year that will probably require you to amend your 2016 tax return to report the excess on line 7 of your tax return - it can be entered this way and then ignore the 1099-R when it comes.

Excess 401(k) deferrals should be reported in:

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 and an explanation.

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

Quote from pub 525
"Excess deferrals. If your deferrals exceed the limit, you must notify your plan by the date required by the plan. If the plan permits, the excess amount will be distributed to you. If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year.

You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. File Form 1040 to add the excess deferral amount to your wages on line 7. Do not use Form 1040A or Form 1040EZ to report excess deferral amounts.

Excess not distributed. If you don't take out the excess amount, you can't include it in the cost of the contract even though you included it in your income. Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution.

Excess distributed to you. If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, don't include it in income again in the year you receive it. If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Any income on the excess deferral taken out is taxable in the tax year in which you take it out. If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income.

You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Use the following rules to report a corrective distribution shown on Form 1099-R for 2016.

If the distribution was for a 2016 excess deferral, your Form 1099-R should have the code 8 in box 7. Add the excess deferral amount to your wages on your 2016 tax return.

If the distribution was for a 2016 excess deferral to a designated Roth account, your Form 1099-R should have code B in box 7. Do not add this amount to your wages on your 2016 return.

If the distribution was for a 2015 excess deferral, your Form 1099-R should have the code P in box 7. If you didn't add the excess deferral amount to your wages on your 2015 tax return, you must file an amended return on Form 1040X. If you didn't receive the distribution by April 15, 2016, you also must add it to your wages on your 2016 tax return.

If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code 8 in box 7. Add the income amount to your wages on your 2016 income tax return, regardless of when the excess deferral was made.

Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution.”
"

[Anonymous]

If I made the excess contribution to a 401k plan unknowingly (because i started a new job and the gross contributions of my previous plan and this new one exceeded the max), rolled both into a traditional IRA, and then filed my taxes... how do i correct it? I have requested an excess deferral payment from my plan administrator, but how do I report this to the IRS since I have already filed my federal taxes? Do I need to file for an amendment? 

[macuser_22]

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@Anonymous wrote:

If I made the excess contribution to a 401k plan unknowingly (because i started a new job and the gross contributions of my previous plan and this new one exceeded the max), rolled both into a traditional IRA, and then filed my taxes... how do i correct it? I have requested an excess deferral payment from my plan administrator, but how do I report this to the IRS since I have already filed my federal taxes? Do I need to file for an amendment? 

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@Anonymous - This is  3 year old post (I know it says 6/3/2019 but that is the date that it was migrated from the old TurboTax forum and lost the real date). 

I would suggest that you ask a NEW question of your own to get other responses.

I am not sure of the answer, but I suspect that since it has already been rolled to an IRA then it cannot be removed by the 401 plan administrator,  but must still be  reported on the tax return in the year that the excess was contributed as taxable wages.   That means that when  you take an IRA distribution you will again pay the tax on the distribution.   the double tax it the penalty for not removing the excess in a timely fashion.

2019 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) (Includes excess salary deferrals)->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.

This will add the returned excess to your 2019 wages on line 1

@dmertz - any comments?

[dmertz]

If the amount of the excess deferral wasn't included as income on your filed tax return, you need to amend to do that.  That's all that needs to be done with your 2019 tax return.

If you are able to obtain a return of the excess deferral from the 401(k) plan, perhaps possible if the rollover to the IRA was only a partial distribution from the 401(k) plan, that would avoid double taxation of the excess deferral and only any gains attributable to the excess deferral that are required to be distributed would be taxable (on your 2020 tax return).