Which is the correct way to report excess 401k contributions in 2018 ?

[PeterNik]

I see some say to enter it under Misc Income and some say to enter it under Retirement Plans and Social Security. Is there a preferred way to do this in Turbo Tax 2018 ?

I got the excess amount back as a check in  March 2019. I did not get an amended W2 or 1099R.

Also TT keeps running smart check complaining about the excess 401K contribution.

Thanks

[Rachel_W]

Either way is fine, as long as the excess 401(K) contribution is included as wages on your 2018 Tax Return. You do not need an amended W2 and you won't receive a 1099R until next January.

NOTE: There is currently an e-filing issue within TurboTax related to excess contributions.  An update to fix the issue is expected to be released around 4/5/2019.  You can check out this TurboTax FAQ for more information: Excess 401(k) Contribution Preventing E-filing.  Be sure to sign up for updates to be alerted as soon as there is a solution.  

I am including the instructions for my preferred method below: 

If you overcontributed to your 401(k) in 2018 and the excess was distributed in 2019, you need to include the excess contribution to your 401(K) on line 1 of your 2018 Form 1040 by following these steps: 

• Open your return
• 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" and click "Show More"
• 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 "Continue" 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 "2018 Excess 401K Deferrals" and click on "Done"

You will receive a Form 1099-R in 2019 with a code P in box 7 which you can ignore if the excess deferral is reported as suggested above.  However, the earnings (if any) will be reported on a separate 2019 Form 1099-R with a Code "8" in Box 7 that should be reported on your 2019 tax return.

[seabass1819]

I have the same problem for tax year 2019.  Received the excess contribution check plus the gain on 4/7/2020 but no 1099R until next year.  The help button in turbotax suggest to file like Ireceived a 1099R instead of adding the amount to "other income".

  Also if I follow your advice, do i report just the extra contribution or also include the gain?  I think the gain should only be reported in 2020. 

Which solution should i use? Thank you.

[Kathy1955]

I have a similar issue.  I over contributed in 2019; I had two employers.  Since I did not realize this until after April 15, 2020 neither plan is allowed to return the excess to me.  Do I report the excess the same as if it were distributed?

[imangoldasteh]

still my w2 box 12 shows more than allowable limit and i get automatically tax on it i guess based on software.

should I deduct the excess amount hat i am going to report on 1099-MISc from box 12?   if so I heard I get audited if the change numbers different from original w2?  is it true?  can i just deduct amount from w2 box 12  and add that to 1099-misc?

[ErnieS0]

Yes, change the Box 12 amount to the maximum allowable amount ($19,500 plus up to $6,500 if you are age 50 or over) @imangoldasteh. This is the only way to get rid of the excess contribution penalty.

The IRS will see you are reporting the difference as income.

[rsiy]

Hi Kathy, did you ever get a response for your question? I have a similar situation for 2021.