Reporting excess salary deferrals (excess 401k contributions) returned to you after the end of the tax year but by April 15th of the following tax year on your 1040. Do not create your own 1099-R for this situation.
Page 10 of IRS Pub
525 under Excess deferrals (the IRS term for 401K contribution is deferral)
tells us to include the excess deferrals as income on line 7 of Form 1040 if
the money was returned after the end of the tax year but by April 15th of the
following tax year. You need to report only the excess contribution, not
any money generated by the investment of the excess contribution. What
you earned will be covered by a 1099-R for the following tax year and will be
entered then as a normal 1099-R.
Below is how to do this in TurboTax:
Do we report the value of the excess deferral? Or just enter the description? If I am taxed on this amount for the 2018 tax year, will I also receive a 1099 and be taxed on this amount again when I file in 2020 for the 2019 tax year?
You should enter the amount of the excess contribution. You will not be taxed again in 2019 as the 1099-R that you will receive should have code P in box 7 which means Excess contributions plus earnings/excess deferrals taxable in 2018.
I followed these instructions and was informed I still need to paper file. When I print out the paper document I do not see anywhere my note of 401k Excess Deferrals that I entered on turbotax online. Why is it not showing on the printed docs?
Yes. I have same issue. E-file doesn’t work and paper file doesn’t print out this is for “Excess Income Deferral “. Would Turbo Tax people please fix it ASAP before April 15,2019 Tax deadline? Thanks!
TurboTax has a help link "how to fix Excess Contribution to 401K" with 3 specific examples. It says Create a 1099R (with whatever information you have) even you have not received yet(will receive in 2019 for 2018 excess 401K contribution) and select code "P" in the box(Weird though as P says for tax year 2017, which is not the case) and mark the 1099R as 2019. But my question is where will I get other info like Payer Tax ID, State Tax Id, address etc.(Those may not be same as employer stated in W2, I don't know until I get the real 1099R from my company and those needed to fill the 1099R) and Support here saying don't create 1099R for this scenario. Really confused what to do, Could Turbo tax support please clarify. Please help..!!! -Thanks.
Just Clarification: Changed the year I will receive 1099R is in 2020 for 2019-1099R.
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TurboTax has a help link "how to fix Excess Contribution to 401K" with 3 specific examples. It says Create a 1099R (with whatever information you have) even you have not received yet(will receive in 2020 for 2018 excess 401K contribution) and select code "P" in the box(Weird though as P says for tax year 2017, which is not the case) and mark the 1099R as 2019. But my question is where will I get other info like Payer Tax ID, State Tax Id, address etc.(Those may not be same as employer stated in W2, I don't know until I get the real 1099R from my company and those needed to fill the 1099R) and Support here saying don't create 1099R for this scenario. Really confused what to do, Could Turbo tax support please clarify. Please help..!!! -Thanks.
I am in same boat. Is turbotax working to fix this issue?
Hope someone in Support or user community will reply...
All, I have been researched other websites for answer and came across this from TaxAct.com. Please go to this link:
<a rel="nofollow" target="_blank" href="https://www.taxact.com/support/1210/2018/form-1099-r-code-p-excess-contributions-401k">https://www.taxact.com/support/1210/2018/form-1099-r-code-p-excess-contributions-401k</a>
"Code P indicates that the taxpayer contributed more than allowed to a 401k, IRA, etc. (through payroll withholding), and must include the excess contributions as income for the year in which the contributions were made. If the excess contributions have not already been claimed in that year, the return would need to be amended to include the excess distribution as income.
If the taxpayer has already included the excess contribution on their tax return of that year, they would not need to do an amended return, and can ignore the Form 1099-R received in the current year.
See Form 1099-R Instructions for Code P for more information.
To avoid the need to amend the return a year after the fact (if you already know you will be receiving a Form 1099-R next year with a Code P), include the data in the tax return in the current year with a Code 8. You can then ignore the Form 1099-R with the Code P when you receive it a year later. Code 8 indicates that the amount is taxable in the tax return you are currently working on, and Code P indicates the amount is taxable in the prior tax year."
I believe there are two solutions to this:
1). Report as "Miscellaneous Income" as suggested above.
2). Follow the TaxAct's advice and file a 1099-R and enter code 8 and amount on box 1a and 2 of the 1099-R you will receive from your 401K administrator. You can call them for payer ID and they should provide one to you. The actual amount may not be exactly as you have exceeded because gained and losses. File this along with your 2018 tax return as suggested above.
As far as the TurboTax printed form not including the 1099-R or mentioned anywhere about the excess return for income deferral. Actually the form is there after you filled it out. It's hidden.
1) Click on the "Forms" at the upper right hand corner right next to the state tax you own amount.
2) This will take you to all the detail paper work behind the user interface.
3) Click on the "Open Form" and expand the federal tax and search for 1099-R
4) There should be a 1099-R form you had filled out. Open it and save or print as PDF
5) Finally print the 1099-R and your final tax
All the above were just my personal opinion. Since I am not tax account. Please use it at your own risk.
Best Luck!
My other advice is to go to TaxAct and open an account and don't provide your actual social security number and just enter other income information to double check if you are filing it correctly. Remember if you don't file, you don't pay on this website.
This all we can do until TurboTax get back to us with real answer. If at all and before the April 15 deadline.
Either creating 1099R or Reporting as Excess Deferral in other section as mentioned in the review
W2-W2G summary showing error and can't proceed to file. On the 1040 form Line1 has the modified wages(reported W2 wage + Excess Deferral, reported either of these way) but it is not removing the 12b date. So how to proceed further and e-file?
Any update Please, Can I do efile for have to paper file, even after modifying excess 401K contribution by choosing adding 1099R/Add to other income under excess Salary deferral. Any help is highly appreciated. I am really stuck...what to do, hate to do paper file, but if I have to then I will but need second opinion. Thanks in advance.
TurboTax has stated that efile does not work for people like our situation (even with the latest software patches). So the only option is to paper file it via US Postal Services. Just printed out as I have indicated above and print out the 1099-R with the method I suggested. I would file both together so IRS knows that the extra amount is for "Excess Income Deferral". The code "8" in box 7 of 1099-R will indicate that this is for 2018 excess 401K contribution. So when you get the real 1099-R next January 2020. You can just ignore that since you already took care of it in 2018 tax return.
Just remember don't try to efile it. It doesn't look like TurboTax will fix it.
Best Luck!
Hi there - I was in the same boat last year, but I was not aware of TT's issue of not including the 1099-R. Do you know if I can figure out if I did the right thing by looking at my tax return numbers?
it may but we wouldn't be able to view it here in community. You may wish to contact a specialist that can view your return to see if you did it correctly.
I got the check before April 15th (let's say April 10th). Let's say the 401k excess amount was $10000. The check I got was $7000 (30% withheld). If I enter $10000 into TurboTax (for the current year), my tax goes up the extra $3000.
Doesn't this mean I am double-taxed ? They say they will send 1099-R next year, and suggested to contact TurboTax to find where to enter the withheld amount (or rate) for the excess $10000.
Where do I enter the withheld amount ($3000) in TurboTax?
I don't agree with the advice given regarding how to report the distribution of an excess contribution to a 401K plan. The important thing here is that the amount of excess contribution was distributed before the deadline. Taxpayer must wait until they receive form 1099-R, the year after, in order to report the transaction in their tax return. If 1099-R has code P in box 7, they will amend prior year return and add the 1099-R. If it has code 8 in box 7, it will be added to the tax year it was issued. Keep in mind that the plan administrator will withhold taxes from the excess contribution. Reporting the excess contribution by adding it to the wages before receiving the form 1099-R, will not take in consideration the tax withheld, nor the earnings that will be added to Box 1. Bottom line, wait until you receive form 1099-R in order to report the transaction in your tax return.
@Moussa Nancy wrote:
I don't agree with the advice given regarding how to report the distribution of an excess contribution to a 401K plan. The important thing here is that the amount of excess contribution was distributed before the deadline. Taxpayer must wait until they receive form 1099-R, the year after, in order to report the transaction in their tax return. If 1099-R has code P in box 7, they will amend prior year return and add the 1099-R. If it has code 8 in box 7, it will be added to the tax year it was issued. Keep in mind that the plan administrator will withhold taxes from the excess contribution. Reporting the excess contribution by adding it to the wages before receiving the form 1099-R, will not take in consideration the tax withheld, nor the earnings that will be added to Box 1. Bottom line, wait until you receive form 1099-R in order to report the transaction in your tax return.
If you know the amount of the returned excess then it is not necessary to wait for the 1099-R and amend. The only IRS requirement is that the returned excess be added to the 1040 line 1 (wage) income. The 1040 is the ONLY thing that is sent to the IRS so it is immaterial how it got on line 1. TurboTax has a method specifically for this and is named "excess deferrals".
This is reported for the tx year in which the excess was made.
(There are several screens to click through to get to the right place)
Miscellionious Income ->
Other Income not reported on a W-2 ->
Other wages (yes) ->
House Hold employee (Continue) ->
Sick Pay (Continue) ->
Other earned income (yes) (Includes excess salary deferrals)->
Source of income (other) ->
Any other income - enter the amount of the excess deferral and an explanation.
This will add the returned excess to your 2019 wages on line 1 exactly the same way that the 1099-R would. The only information that is sent to the IRS is the line 1 amount.
Hi,
This is my first time posting on TT Community. I am impressed that it is a pretty interactive tool.
First, thank you for your explanation. The issue here is that the 1099-R that will be issued next year has more than the returned excess reported on it. It will have some earnings, probably a few dollars, and mainly the tax withheld, federal and state. How to handle the 1099-R next year if you already added the returned excess to the wages in the current return?
Thanks!
Nancy
@Moussa Nancy wrote:
Hi,
This is my first time posting on TT Community. I am impressed that it is a pretty interactive tool.
First, thank you for your explanation. The issue here is that the 1099-R that will be issued next year has more than the returned excess reported on it. It will have some earnings, probably a few dollars, and mainly the tax withheld, federal and state. How to handle the 1099-R next year if you already added the returned excess to the wages in the current return?
Thanks!
Nancy
It should not. If the earnings are included on a 1099-R with a code P then it is an improper 1099-R because a code P can never report earnings. The excess is reported returned wages in the tax year that the excess was made and the earnings taxed in the year returned.
The earnings can only be reported on a separate 1099-R with a code 8 that is reported on the 2020 tax return.
For information see IRS 2019 Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf
[quote]
"If the distribution was for the income earned on an excess deferral, your Form 1099-R should have code 8 in box 7. Add the income amount to your wages on your 2019** income tax return, regardless of when the excess deferral was made.
**NOTE the latest IRS Pub is for tax year 2019, that will become 2020 for the 2020 tax year.