Over-contributed to 2017 401k by $6000. Received refund from plan for the overage + earnings (403b, pretax.) How can I report for 2017 and not be charged again for 2018?

[Rachel_W · Accepted solution]

You can report the refund of the $6,000 in excess contributions to your 401K on Line 7 of your 2017 Tax Return without a Form 1099-R by following these steps: 

• Click on the "Federal Taxes" Tab
• Click on the "Wages & Income" Tab
• Click on "I'll choose what I work on"
• Scroll down to "Less Common Income"
• 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 until 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

[macuser_22]

In addition, If returned in 2018 then you will receive a 2018 1099-R in 2019 with a code P in box 7 (taxabe and reportable on your 2017 tax return) which you can ignore if the excess deferral is reported as in the answer above.   However, the earnings (if any) will be reported on a separate 2018 1099-R with a code "8" in box 7 that is reported next year on your 2018 tax return.

(Excess deferrals are reported in the tax year that the excess occurred.  Earnings are reportable in the tax year received.)

[sarahbee]

Thank you for the responses. The check I received (in 2018) includes excess + earnings. Should I take out the earnings and only report the excess for 2017 (and i.e. report the difference for 2018 with 1099-R)?

[macuser_22]

Yes.  Only report the excess deferral, not the earnings which will be taxed as an early distribution from your 401(k) on your 2018 tax return - also subject to a 10% early distribution penalty if under age 59 1/2.

If you include the earnings in 2017 you will be double taxed in 2018 when you report the 1099-R with a code "8".