Please read this answer by TurboTaxDavidD which addresses your question. You do not need to make any other notification to the IRS. Reporting the over-contribution as income will suffice:
The first thing you need to do is have the excess contribution (deferral) withdrawn from your 401(k).
Reporting excess salary deferrals (excess 401k contributions) returned to you after the end of the tax year but by April 15th of the following tax year on your 1040. Do not create your own 1099R for this situation.
Any excess 401k
contributions returned before the end of the current tax year should be covered
in a 1099R from the 401k for the current tax year and enter as a 1099R in Turbo
Page 10 of IRS Pub
525 under Excess deferrals (the IRS term for 401K contribution is deferral)
tells us to include the excess deferrals as income on line 7 of Form 1040 if
the money was returned after the end of the tax year but by April 15th of the
following tax year. You need to report only the excess contribution, not
any money generated by the investment of the excess contribution. What
you earned will be covered by a 1099R for the following tax year and will be
entered then as a normal 1099R.
Below is how to do this in TurboTax Online:
- Click on Federal in the left-hand column
- Click on Wages & Income on top of the screen
- Under All Income, locate the Less Common Income section
- Select Miscellaneous Income and click Start or Update
- Select "Other income not already reported on a Form W-2 or Form 1099" and click on Start
- Answer the Question "Did you receive any other wages? Yes
- Click through the questions till you get to Any Other Earned Income
- Answer Yes to "Did you earn any other wages?
- Indicate "Other" as Source of Other Earned Income and click Continue
- For the description enter "2017 Excess 401K Deferrals" and click on Done
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