401K Excess Contribution - Box7 (Code 8)

[sathya]

I have exceeded my 2021 401k contribution between 2 employers. I did excess withdrawal from my current employer (Vangaurd providing 401K service). I have not received any 1099-R form; Vangaurd informed me that they will send 1099-R only in 2022. How to report this in 2021 filing.

Received the refund check with this breakup:
Excess Pre-Tax Deferral = $659.73
Allocable Income = $27.61
Total Amount of Refund = $687.34

I am entering this refund as if I received the 1099-R form with these entries. 

Box 1 and 2a = $687.34
Box 7 = 8 - Return of contribution taxable in 2021


Am I doing this correct? Do I have to enter full refund amount or only excess pre-tax deferral in 1 and 2a box?

Thanks!

[DanaB27 · Accepted solution]

No, please follow the steps below to report the 401k excess deferral on your 2021 tax return. The earnings will have to be reported in 2022.

1. Login to your TurboTax Account 
2. Click "Federal" from 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 "2021 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

Please note for the Tax Year 2022 tax filing due April 15, 2023: 

2022 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 2021. 
• However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2022.

[KingJewels]

I am in the same situation. Spouse worked for 2 different employers in 2021. Total YTD for 401K contribution exceed the 19500. I followed the stepped outlined to list the Other Earned Income. 

Do I need to reduce the 401K contribution to total 19500 in a different screen? The amounts in the W2 added to over 19500 so I am not sure if I need to change the original amount. I have not received a revised W2.  

[DanaB27]

No, you do not make changes to your 401(k) contribution amount. Just enter the W-2 as shown. Since you are taking the correct actions, you can ignore the excess messages. 401(k) excess deferrals don’t cause a penalty to be calculated on your return like an excess contribution to an IRA.

Please be aware, that if you do not take out the excess amount by April 15th (your plan fails to return the excess by April 15th), then you are taxed twice on the excess deferral left in the plan.  This happens once when you contribute it 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.

@KingJewels
 

[kumar01545]

In my turbotax desktop addition Turbotax suggest to follow 

1. Report the excess deferral on your 2021 return in the Income section for Retirement Plans and Social Security whether or not you
received a Form 1099-R before you file your return. Enter as much information as you can. Report the excess deferral amount in boxes 1
and 2a, and use code P in box 7. Indicate that this is a 2022 Form 1099-R.

Which different than you suggest ? i also have question do i need to fill Payer information as well

[DanaB27]

Yes, you have the choice of which option you want to use but the instructions above are easier to enter since you don't need the payer information.

Yes, if you use the 1099-R option then you will need to fill in the payer information.

@kumar01545