Which year tax return to report 2018 1099R forms on received for refund of excess contribution to 401K and gains? Amend 2017 return?

[aa2]

I received Two 2018 1099R forms (in Jan 2019) for refund of excess contributions made to my 401K plan. Excess contributions were made in 2017 (employer messed up), pointed it out to employer who then issued two checks for refund of contribution and gains in January 2018 (hence, two 1099R forms). 

Question is which year tax return do these 2018 1099R forms need to be reported on: 2018 or do I need to amend 2017 return? At the time of refund, employer told me this would be income for 2018 but turbotax Premier is telling me to amend 2017 return. It would be great if someone could also point me to the appropriate IRS guidance on this as well (if you know). Thanks!!!!

[Rachel_W · Accepted solution]

Yes, if you did not adjust your wages on your 2017 Tax Return for the excess 401(K) contribution, you will need to Amend your return to include the Form 1099-R with Code P in box 7.  Your 2017 excess contribution must be included with your 2017 income.

You can click here for instructions on Amending your tax return: How to Change a Tax Return You Already Filed. 

The earnings from the excess contribution should be reported on your 2018 Tax Return.  The Form 1099-R with Code "8" in Box 7 should be input on your 2018 tax return.  

Please comment below if you need further clarification.

[aa2]

Thanks, TurboTaxRachelW! So, based on this answer: the 1099R (code P) income should go on 2017 tax return, and code 8 income on 2018 tax return. Few points for clarification: (1) I have to amend the 2017 return even though it is a 2018 1099-R form (with code P)? Isn't this an income in 2018 if I only received it in 2018? Why would the employer not issue this 1099-R for 2017 then? (2) How do I know if I adjusted wages for 2017: I received a W2 for 2017 after this transaction and used the taxable income reflected in that W2. To adjust it, would I have had to actively add this income (from 1099R) to the W2 income? (3) Can you please point me to an IRS document? Thanks again!

[aa2]

Also how do I add 1099-R (code 😎 income to my 2018 return? TT is not asking for this distinction - it is just telling me to amend 2017 return.

[aa2]

and another follow-up: Anything I can do now to avoid having to amend 2017 return?

[Rachel_W]

@aa2:
1) Yes, you must amend 2017 to include the excess withdrawal that was included on the 2018 1099-R. It is taxable income for 2017 because you were not eligible to defer it in 2017.
2) Yes, you would have had to manually adjust your wages when preparing your 2017 Tax Return to include the excess contributions as wages on your return.
3) <a rel="nofollow" target="_blank" href="https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-deferrals-to-a-4...>
4) TT should allow you to enter the 1099-r with Code 8, are you getting an error message?
5) No, there is nothing you can do at this point to avoid having to Amend your 2017 return

[aa2]

Thanks!

[aa2]

Let me circle back with TT error...