401k excess deferral treatment

[needtaxhelp401k]

I had two employers in 2023 and mistakenly had an excess deferral to my 401k of around $920. I just noticed this a few days ago and have been advised by both plan administrators that I missed their deadlines to request a proper refund of the excess contribution. So instead, I've asked to make an 'early' withdrawal in this amount from the more recent plan (where the excess deferral was essentially made). Federal taxes will be deducted from the withdrawn amount. I won't receive any 1099-R pertaining to the withdrawal until next year, but as I'm doing this before April 15, I'm assuming I can/should indicate the withdrawal and tax withholding on my 2023 return. Is that correct? Can you guide me on how to appropriately account for all of this on this year's return? 

Thank you so much.

[DanaB27]

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 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.

You must include the excess deferral in your wages in the year the excess deferral happened. 

Please follow the steps below on your 2023 return:

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 "2023 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

It seems you will be taxed twice since your plan administrators informed you that I missed their deadlines to request a proper refund of the excess contribution. Your 2024 Form 1099-R will be coded as an early distribution and this will need be reported on your 2024 tax return.

Please see Pub 525 for additional information.

[needtaxhelp401k]

Thank you. So in other words, is it pointless for me to have requested the distribution, because the IRS won't  actually consider it a refund of the excess distribution? 

[needtaxhelp401k]

oops sorry - that should have read "So in other words, is it pointless for me to have requested the distribution, because the IRS won't  actually consider it a refund of the excess contribution?" 

[DanaB27]

Unfortunately, it seems that way but I would check with the plan administrator. 

[needtaxhelp401k]

thanks. of course they won't give me any advice that's tax-related. Rather than risk essentially doubling the amount I would be double-taxed/penalized for, I was able to cancel the early withdrawal just now, and will simply declare the excess contribution in my 2023 return as you advised.