Roth 401(K) Excess Deferral

[Taxn00b15]

Due to changing employers, I have excess deferrals to my Roth 401(k) during 2020.

I informed the benefits provider, and received distribution of the excess deferral + earnings on the excess before the required deadline.  The benefits provider makes it clear that the Earnings on the excess deferral are taxable in 2021.  Since this is a Roth contribution, I have already paid taxes on the excess contribution itself during 2020.   The benefits provider is not sending any additional 1099s for 2020.

To address this situation (I interpret as "to inform the IRS that I corrected the excess deferral") TurboTax guides me to:

• add an additional 1099, completing box 1 (I interpret as "Excess deferral + Earnings") and 2a (I interpret as "Earnings").   
• in Box 7, indicate code P.   
• Indicate that the form year is 2021
• When filing 2021 taxes, enter all 1099s that I receive.

My questions:

• Should I use indicator B in box 7?   TurboTax does not comment, but since B indicates Roth, seems appropriate?
• Why is the direction to use code P instead of code 8?   I am finding it confusing which of these codes would indicate that the taxes on earnings are owed in 2021 given that this will be a 2021 form.
• Is there need to use code J in box 7?   This is technically an early withdrawal, but I assume code 7 indicates additional penalty is required, which I don't think is correct--- taxes would be paid by nature of including the earnings in box 2a.

Thank you!

[macuser_22]

ONLY the earnings are reportable.   If returned in 2021 then that will be reported to your on a 2021 1099-R that will go on yiur 2021 return next year.

The IRS instructions say for a returned designated Roth excess to not report it as wages on the 2020 tax return because it was not deducted in the first place.  Roth contribution are always after tax.   Only before-tax contributions to Traditional 401(k) plans must be reported.

[Taxn00b15]

Thank you for the reply.  I think the Turbo-Tax suggested approach described below matches what you are saying so long as:

it is indicated that the 1099 form year is 2021

only that the Earnings on the excess contribution are listed as Taxable in Box 2Aportion of the withdrawal is taxable in box 2a.

Is that correct?