Return of 401k Excess Deferral

[aroonsmita]

Hello all, I received my Return of 401k Excess Deferral check today.  It was for excess deferrals (contributions) in 2020 as I went over the $19500 combine annual limit across 2 employer 401k plans.

They have broken the reimbursement down into 3 parts: For argument's sake, let's say the Excess Deferral is $100.  They also returned the employer's match of $20. And then the income on the contributions which is $10.  So let's say a total of $130.

As I received the check this before the Apr 15 deadline, the $10 income will go on the 2021 return only and the $100 contribution will go on the 2020 return.

But what about the return of the employer's match of $20?  Does that go along with the $100 Excess Deferral onto my 2020 return for a total of $120?  Or is the Employer Match not related at all as it had nothing to do with the $19500 individual contribution max?

Thank you all

[DavidD66]

The $20 employer match should have been returned to the employer, not you.  It was not part of your salary deferral, so it shouldn't be added to the excess deferral amount.  I recommend contacting the plan administrator and asking them if you  should return it, or will it be added to income on excess contributions.  

[aroonsmita]

@DavidD66 thanks for your reply.

I also wasn't expecting the employer match to be distributed.  But Fidelity sent it to me and neither I nor they can send it to my old employer as I do not have a relationship with them any longer; they don't manage the plan.

Therefore, given that I have received the reimbursement before April 15, do I put the Excess Deferral on my 2020 return and this additional income on my 2021 return?

Thanks

Aroon

[DanaB27]

Yes, since you are unable to return it you will add it as an excess deferral on your 2020 return.

To report the excess 401(k) contributions and subsequent distributions, a 2020 plan excess distributed in 2021 is reported on line 1 of your 2020 Form 1040:

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 "2020 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

Please note for the Tax Year 2021 tax filing due April 15, 2022: 

2021 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 2020. 
• However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2021.