Reporting Excess Roth 401K Contribution

Forum|Forum|6 years ago
April 4, 2020
1 reply
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I have read other TurboTax FAQs and I am seeing conflicting information on how I should respond to my exact situation. My employer over contributed to my 2019 Roth 401K by $2,000.97. They caught the error and sent me a Participant 402(g) Tax Coding Summary. It shows the $2,000.97 excess contribution and the $484.32 of earnings. I was then sent a check for $2,485.29 minus federal taxes of $48.83, state taxes of $24.70, and a $20 distribution fee.

My W-2 shows box 12a as 'D' with $2000.97, and box 12b as "AA" with $19,000.

The 402(g) form states that "the excess deferral ($2,000.97) must be reported as income on your 2019 income tax return. This distribution will be reflected on IRS Form 1099-R which will be sent to you in January 2021. The tax code reported is a distribution code "P", a prior year (2019) taxable event.
The earnings attributable to the excess deferral ($484.32) are to be reported as income on your 2020 income tax return, which is reportable in the tax year in which the distribution occurred. This distribution will be reflected on IRS Form 1099-R which will be sent to you in January 2021. The tax code reported is a distribution code "8", a current year (2020) taxable event."

After reading TurboTax FAQs, Google searches and IRS Publication 525 (2019) page 10 "Excess distributed to you", I am very confused as to what to do this year and next. Do I create a "fake" 1099-R this year? If so, what do I put in the various boxes, especially the top and bottom item 7 boxes (which are the source of the most conflicting recommendations)? I looked in creating a "fake" 1099-R, but code 'P' references 2018 which doesn't match what form 402(g) states above.

Let me know if I can provide more information to inform a confident response. Thank you in advance.

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aquaroverAuthor

Level 2

As a follow-up, I have also read online in a few places that filling out a "fake" 1099-R for this year is both unnecessary and problematic. Problematic because I would be submitting a mostly blank form which may flag an audit, and unnecessary because the 402(g) form states I need to report the $2,000.97 this year as income, but not the specific way to do so, and the easiest way would be submit it as "Miscellaneous Income". The only downside is that to report Miscellaneous Income, I need to upgrade to the Deluxe version of TurboTax. Does this make sense? I still don't know what exactly to do!

MaryK4

Level 15

A "mostly blank form" (1099-R) will not trigger an audit and not necessarily unnecessary because although 402(g) does not have the specific way to report the income, the interest on the excess contribution is in fact a distribution from a retirement account. If you do report as Miscellaneous income, you are correct that you would need to upgrade to Deluxe.

@aquarover

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