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Level 2
posted Mar 5, 2021 5:46:54 AM

Solo 401 Excess Contribution and Prompt Correction/1099-R

Sole Proprietorship here. In early March 2020 I made an employee (self) 401k contribution of $15,000 for the year 2019 (which is permitted) and a couple of weeks later discovered a computational error so the contribution was $3,000 to high.  I called Fidelity and they took the $3,000 out of the solo 401K and deposited it back into the taxable account.  The solo 401k is cash and no income was earned on the $3,000 while in the solo 401k.  On the 2019 tax return I showed a $12,000 contribution, which was the correct net.

 

Now a year later and I have a 1099-R from Fidelity showing the $3,000 as as distribution out of the solo 401k and checking the box 2a and taxable and leaving 2b (taxable amount not determined) blank.   Box 7 is E, which is Distributions Under Employee Plans Compliance Resolution System (EPCRS). 

 

1.  Do I need to ask Fidelity to check box 2b?

2.  Am I correct that this "correction" is in fact not taxable (which my research indicates is the case)?

3.  How to handle in TT.  I assume I cannot just ignore it since there is a 1099-R?

4.  Other?

 

Thank you!

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1 Best answer
Expert Alumni
Mar 10, 2021 1:37:10 PM

You do ignore the 1099-R (do not enter it into the TurboTax program) since it is only reporting the correction for the excessive contribution for the previous year. 

 

Please see additional answer linked below: 

 

Additional TurboTax Answer

1 Replies
Expert Alumni
Mar 10, 2021 1:37:10 PM

You do ignore the 1099-R (do not enter it into the TurboTax program) since it is only reporting the correction for the excessive contribution for the previous year. 

 

Please see additional answer linked below: 

 

Additional TurboTax Answer