Good morning everyone,
A couple of questions around ROTH IRA and Traditional 401K:
1- In 2022, I over-contributed to my traditional 401K. I sent a request to my brokerage firm to remove the contribution and send me a check back. My question is , as I file my taxes in 2023, is there anything that I need to do to inform IRS that I have remove the excess contributions or will that happen in 2024?
2- As I was doing my 2023 taxes, it turns out that my wife and I were over our MAGI to contribute to a roth IRA (Even though we maxed it out in 2022). I asked the brokerage firm to remove 2022 contributions (with a special form). Is there anything that I need to do on my 2022 taxes to inform IRS that I removed my ROth IRA contributions (with earnings) in 2022.
Thank you,
Alex Mansur
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1. Please follow the steps below to enter your 401k excess into your 2022 tax return:
Since you receive the distribution of the excess deferral and earnings by April 15th then please note for the Tax Year 2023 tax filing due April 15, 2024:
2. Please enter during the IRA contribution interview on the penalty screen that you removed the excess contribution by the due date this will remove the 6% penalty.
You will get a 2023 Form 1099-R in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:
To create a Form 1099-R in your 2022 return please follow the steps below:
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.
1. Please follow the steps below to enter your 401k excess into your 2022 tax return:
Since you receive the distribution of the excess deferral and earnings by April 15th then please note for the Tax Year 2023 tax filing due April 15, 2024:
2. Please enter during the IRA contribution interview on the penalty screen that you removed the excess contribution by the due date this will remove the 6% penalty.
You will get a 2023 Form 1099-R in 2024 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2022 tax return and you have two options:
To create a Form 1099-R in your 2022 return please follow the steps below:
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.
Fantastic explanation. THANK you so much for walking me through this. To summarize:
1- For my 401K excess contributions, I added the excess into 2022's tax via the misc income and the excess got taxed. In 2024 we can ignore form 1099-R with code P since I reported it in 2022 (today). but any earnings with code 8 in box 7 will be reported in 2023 and I do not have to amend 2022, correct?
2- I am trying to calculate the contributions + earnings (the earnings part is a bit challenging). If I cannot calculate it, in 2024, when I receive my 1099-R, I would have to amend my 2022 tax filing to enter the necessary information. I have never amended a tax return. Is it difficult?
Regarding your first question, no you will not have to amend for 2022, because you are making the corrections now.
Regarding your second question, you could try to ask your financial institution to calculate your earnings for you.
It is not hard to amend your return. Follow the prompts in TurboTax and they will walk you through the steps.
Click here for a TurboTax video on How to amend your tax return.
Click here for instructions on How to file an amended return.
Click here for information on amending your tax return in TurboTax.
Thank you @LindaS5247 - that makes sense and I will contact my financial institution 🙂
Yes, you would enter the loss as well. It would be entered as "Other Income". identify it as "Loss on Excess Deferral Distribution."
Other income is reported on line 8 of Schedule 1 of Form 1040 and then the total from line 10 of Schedule 1 is transferred to line 8 of Form 1040 itself.
To enter as Other Income in TurboTax, here are the steps:
Or you can:
Click here for additional information on an excess 401(k) deferral.
hi! how do I adjust if I am not going to get the excess back by the tax deadline?
How would I handle an over contribution to my 401K if I am not able to get the excess back by the tax deadline?
If you cannot get the excess deferral distributed by April 15th (note this isn't the tax return due date) then you are taxed twice on the excess deferral left in the plan. This happens once when you contribute it (when you add it to your wages with the steps below) and again when you receive it as a distribution (From 1099-R).
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