Repayment of 401K excess distribution made by my employer by mistake

[joycengu]

I received a check (net after federal and state deducted) from my 401K plan administrator in March 2024 for "a distribution of Return Of Excess (ROE) contributions and or company match dollars for highly compensated employees".  Then on Feb 2025, I received another letter from the plan administrator stating that the refund was processed in error and that I may choose to return the excess amount we received to our Plan account or choose to keep the fund.  I decided to return the funds and remitted a certified check (gross amount) in the same month to repay the the excess amount refunded to me.

I received a 1099R for the return of excess distribution.  When I entered this 1099R on my tax return, my federal tax and state tax liabilities increase significantly (even without early withdrawal penalty).  Since I have repaid the funds back to the 401K plan and this is by no means my mistake, I would think I should not be made to pay the taxes.  How should I report this on our 2024 tax return?  

[Opus 17]

The plan should send a corrected 1099-R showing no withdrawal.  I would first contact the plan and ask them about this.  If they agree, then you can file your tax return by leaving off the original 1099-R.    If they will not issue a corrected 1099-R, then I can tell you how to handle it if you were to file by mail, but I'm not sure what to do if you were e-filing (because I don't know if the usual instructions for fixing this sort of 1099 issue will work for a 1099-R).

For paper filing, you would leave off the 1099-R.  Attach a copy and a written explanation to your return.

@dmertz  do you have a suggestion how to e-file in this case?

But hopefully the plan custodian will issue the corrected 1099-R. 

[dmertz]

What is the code in box 7 of this Form 1099-R?