Reporting excess Roth 401k Contribution

[jumattb29]

I'm a little confused how I should be reporting my excess contribution for my Roth 401K.   I'm trying to avoid any possible penalties.  Though the amount isn't significant, I want avoid any potential issues in the future.  Here is where I am at:

1) I over-contributed to my ROTH 401K in 2019 by $102.45.  All my contributions for 2019 went to my ROTH 401K plan.

2) Fidelity, who manages my 401K, had me wait until I got my W2 forms in 2020 before I can request a return of excess contributions. 

3) I submitted the form to Fidelity mid January 2020 and received a check for the excess contribution plus the earnings dated February 4, 2020.  However, according to them, my employer would only return the funds from the pre-tax funds (not Roth) from my 401K.  (I was employed with this company in 2016 and had Traditional 401K contributions through Fidelity under the same account).

I confirmed with Fidelity that I will not be getting 1099-R forms for 2019.  I will be receiving it in 2021 for the 2020 tax return. 

My question is, am I done until next year or do I have to do something on my 2019 return?   If so, how can I report that I made the corrections in my 2019 year?  I would think that if I do nothing, they will assume that I never corrected it and would be subject to penalties.  Thank you!

[DianeC958]

You need to do something on your 2019 tax return.  Since you withdrew the excess contribution before filing your taxes you do not want to report on your 2019 return that you made an excess contribution, this avoids you paying the 6% penalty for over contributing to your Roth IRA.

To report the earnings the withdrawal create a 1099-R in your 2019 return

You enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top)

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2020 1099-R.

After the 1099-R summary screen press continue.

This taxes the earnings for this year and then when you receive the 1099-R for 2020 there is nothing to report since you have already reported the information for 2019.

[jumattb29]

Thank you for your response.  To confirm, this is a 401K and not an IRA.  I overcontributed by $102.45.  My check (the overcontribution plus earnings) is $127.93.  If the funds were redrawn from the Traditional 401K (even though the excess was in my Roth 401K), am I still only putting the earnings of $25.48 ($127.93 - $102.45) in box 2A?

For 7, its a dropdown, so if I select P, it automatically says "Return of contribution taxable in 2018".  I dont see an option to choose for 2019.

For 7, if I select J its specifies Roth IRA, but its a 401K.

I appreciate your response.  Let me know if anything should be adjusted.  Thanks again!

[DianeC958]

For Box 7 use Code 8

[victors9739]

Quick followup question (this original post and response is very helpful, so thanks!)

I have received my excess check with a clear breakdown of excess vs. earnings. I've entered the total amount in Box 1, the taxable amount in Box 2A, and Code 8 in Box 7. However, TurboTax won't let me complete the filing without a TIN for the payee (John Hancock in this case). Since I haven't received a 1099-R (and won't until next year), is there a workaround for this? Or should I simply leave the payee information completely blank? Thanks!

[MaryK4]

The John Hancock ID number should be available on their website, statements, or you can call and ask them so that you can efile.

@victors9739

[sr9984]

---

@DianeC958 wrote:

For Box 7 use Code 8

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According to https://www.irs.gov/pub/irs-pdf/p525.pdf on page 10, it looks like code 8 and code B will be in box 7:

If the distribution was for a 2019 excess
deferral to a designated Roth account,
your Form 1099-R should have codes B
and 8 in box 7. Do not add this amount to
your wages on your 2019 return.

[MaryK4]

It is saying do not add to your wages because if it were a ROTH contribution, it would have been included.

@sr9984

[trebs719]

SAME SIMILAR ISSUE BUT THAT MONEY ISSUE OF MINE FOR EXAMPLE $ 500.00, I LOST HALF OF THAT MONEY BUT I STILL PAY PENALTY THE WHOLE . I DONT UNDERSTAND MAKE ME SO STRESS EVERYDAY. WHY ? THEN USED MONEY FOR MEDICAL NO CONSIDERATION WHAT SOEVER

[trebs719]

IS ANYONE THERE KNOWS IF SOME OF TURBO EXPERT READING THIS , I WISH I CAN TALK ONE OF THEM EXPERT ON THE PHONE SO I CAN EXPLAIN THE WHOLE SITUATION , BEGINNING TO THE END. WHAT IS GOING ON ?

[CatinaT1]

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