You should report the excess contributions on Line 1 of your 2018 Tax Return by following these steps:
- Login to your TurboTax Online Account
- Click "Take Me to My Return"
- Click "Federal" from the left side of your screen
- 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 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.
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:
- If you had a excess contribution in 2018 did you return it AND report in your return that you returned or plan on returning the contribution by 04/17/2019?
- if it was returned by the due date, did you receive a 1099R for it in the 2019 tax year?
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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