topic Excess 401k contribution taxable twice? in Retirement tax questions

Excess 401k contribution taxable twice?

fred1986 — Tue, 06 Apr 2021 14:31:00 GMT

Question - my client contributed in excess to his 401k in 2019. Turbotax caught the excess and i picked it up manually as taxable income on the 2019 tax return. The 401k administrator issued a 2020 1099-R with the distribution amount in box 1 and box 2a and listed code 8 as the distribution code.

Since i already picked up this amount as taxable income on the 2019 tax return, do I also pick it up again on the 2020 tax return? Do I ignore the 1099-R (put a statement in the tax return stating it was picked up in 2019)?

Re: Excess 401k contribution taxable twice?

MinhT1 — Tue, 06 Apr 2021 14:42:47 GMT

As the excess contribution (and earnings) has already been reported and taxed in 2019, you do not report in again in 2020.

The plan administrator should have reported code P in box 7 of the 1099-R. You could try and ask for a corrected 1099-R.

Re: Excess 401k contribution taxable twice?

fred1986 — Tue, 06 Apr 2021 14:53:50 GMT

Thanks. The amount in box 2a should have been just the increase in the contribution, right (a much lower amount)? Would code P, if they would revise it, make that so?

Re: Excess 401k contribution taxable twice?

MinhT1 — Tue, 06 Apr 2021 15:03:03 GMT

As the 1099-R covers the return of the excess contribution, it only report the excess contributions (and any related earnings), and not the whole contribution.

Code P in box 7 of the 1099-R means Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2019.

A 1099-R with code P does not need to be reported on the 2020 tax return as the excess contribution has already been reported and taxed in 2019.