Incorrect Overpayment Warning for Retirement Contributions in TurboTax?

[bhatiavn]

For some reason, TurboTax is saying my wife overcontributed to her retirement plans based on her W-2 by ~$30k even though her box 12, line D says she contributed $20,000 (she contributed $500 under the limit for 2022). I can't figure out how TT is arriving at the total contribution number from her W-2 and have double-checked that the automatically imported W-2 fields are correct.

Can anybody explain what's going on here?

[DanaB27]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number and tag me @DanaB27. This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number and tag me @DanaB27. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

[bhatiavn]

Token: 1135544. @DanaB27 . Thanks!

[DanaB27]

Thank you, I reviewed your token. Your wife has two W-2s entered, one shows $20k in box 12 with code D plus $500 with code AA and the other shows over $30k in box 12 with code D. Therefore, combine she is over the limit.

Also, when adding your two W-2 code D entries in box 12 you have an excess deferral too. But I saw that you entered your excess deferral already with the steps below.

Please be aware, if you do not take out the excess amount by April 15th, then you are taxed twice on the excess deferral left in the plan.  This happens once when you contribute it (with the steps below) and again when you receive it as a distribution. You can't include the excess amount in the cost of the contract even though you included it in your income.

Please follow the steps below:

1. Login to your TurboTax Account 
2. Click "Wages & Income" (under Federal) on the left side of your screen
3. Scroll  down to "Less Common Income" and click "Show More"
4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
5. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
6. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
7. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
8. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
9. On the "Any Other Earned Income" screen enter "2022 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

If you receive the distribution of the excess deferral and earnings by April 15th then please note for the Tax Year 2023 tax filing due April 15, 2024: 

2023 Forms 1099-R will be issued reporting the excess.

• Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2022. 
• However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2023.

Please see Pub 525 for additional information.

@bhatiavn 

[bhatiavn]

Hm.. I reviewed both her W-2s again and found the problem - one of the two was her main W-2, which I had scrutinized. The other was a minor W-2 and $30k is WAY more than the total amount of the W-2. It was a typo that either came from auto-import or myself - I can't remember which. Either way, I wish TT would show it's work when it's presenting the warning so I could've saved a lot of time chasing this down.

Thanks for your review and helping me spot the issue!