over contribution of a Individual 401K by self employed

[nb880]

When doing my 2018 taxes, turbo tax would not allow me to deduct the full amount of contribution that I made to an Individual 401K.  (Turbo tax saved me from making this mistake) I forgot to deduct the 1/2 self-employment tax.  I contacted the administrator of the Individual 401K and removed the excess contribution of $389.  After I got the money back (Prior to filing) I lowered the amount that I had contributed by $389 in Turbo Tax and filed.  I received a 2019 1099-R from the administrator that states the taxable amount is $389 and distribution code was "P" or excess contributions plus earnings/excess deferrals taxable in 2018.  On line it states to file an amended 2018 tax but I corrected the mistake prior to filing.  How do I handle the 1099-R form? Do I just delete this entry from Turbotax? and respond to the IRS if I get a letter audit?

[dmertz]

Does the code P 2019 Form 1099-R show any nonzero amount in box 2a or box 4?

[nb880]

Thanks for the quick response.

Box 2a shows the $389.  I didn't take the tax break last year for the $389 for the IRA contribution on my filed 2018 taxes, so I paid the taxes on the taxes on the taxable amount last year.

[dmertz]

I'm not quite sure how to handle this.  I don't think that the $389 should actually be taxable on your 2018 tax return because you never took a deduction for it.

Was the excess attributable to your employer contribution or to elective deferrals?

[nb880 · Accepted solution]

I looked over how Turbotax handled the taxable event.  I thought it would add the distribution onto my 2019 taxes.  It does not, the $389 needs to be added to my 2018 taxes, which it already was.  I may get a letter audit for 2018, but I will be able to explain that and give documentation.

To answer your question, it was a employee contribution of the only employee in the company into an individual 401K.  Thus the money got removed that shouldn't had been put in there in the first place.  The earnings amounted to <$10 so no issuance of paperwork on that.

Thanks