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You should report the excess contributions on Line 1 of your 2018 Tax Return by following these steps:
You will receive a 2019 Form 1099-R in 2020 showing the refund with a code "P" in box 7 which you can ignore if the excess deferral is reported as suggested above. However, the earnings 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.
Hi Rachel,
I followed the steps below to other income and added the amount refunded to me for my 401K contribution in 2019 but this did not add the amount of the excess contribution to line 7 as income. What did I do wrong? I wanted to go ahead and pay the tax on this excess 401K the company refunded to me due to their 5500 audit in 2019.
The proper work flow to this issue is that if you had an excess contribution in 2018, there is an entry in Turbo Tax letting you know you had an excess contribution and will ask if you returned it by 04/17/2019. For tax year 2019, you will receive a 1099R reporting the return of that excess contribution and it will not trigger a taxable event if coded correctly in Box 7. My questions are:
in reading the advice that was given above, it sounds like this became much more complicated than it needed to be.
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