What tax documentation do I need to show a refund of my overcontribution to my 401k?

[toastysailor]

I had two employers in 2016, and I seem to have overcontributed to my 401k.  My current 401k plan administrator can refund me the overpayment amount, but how do I show this on my 2016 taxes?  Is there some sort of tax document I should be getting from the plan administrator?  Do I get a corrected W-2?

[PaulaM · Accepted solution]

You will receive a 1099-R for the over contribution. The contribution amount is then included in 2016 income.

Be certain that any earnings on the contribution are also returned. You will pay taxes on the earnings, but avoid the penalty.

[acsing]

The same situation happened to me but I have not received the 1099-R yet. Do they send it before April 2017 or does it not get sent until the 2017 tax deadline in 2018?

[toastysailor]

This is a great comment.  When speaking with the 401k administrator (Fidelity in my case), they indicate that the overcontribution amount will have to be returned to me and that the 1099 won't be sent out until 2018, showing the return of funds in 2017.  That does nothing to help my situation in 2016.  It seems something else should be happening here.

[PaulaM]

Form 1099-R - Code P - Excess Contributions 401k
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. <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1099r.pdf">https://www.irs.gov/pub/irs-pdf/i1099r.pdf</a>

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.