topic Re: Excess 401k Contributions in Retirement tax questions

Excess 401k Contributions

Joearby — Sun, 08 Feb 2026 15:26:44 GMT

Have a situation where I contributed to my Solo 401k but business ended up taking a net loss, so contributions are being considered as excess contributions. However, in the same year I took some withdrawals that exceeded the contributions, which I believe then negates any penalty or need to withdraw excess amount. The question I have is how to report that on in Turbotax. When I import the 401k info from my financial institution, will that be offset?

Thanks in advance.

Re: Excess 401k Contributions

ReneV4 — Mon, 09 Feb 2026 17:41:39 GMT

No. The excess contribution will not be offset automatically when you import your 401(k) information.

TurboTax will see the contributions on one side and the withdrawals (distributions) on the other, but it won't link them to solve the "excess" issue.

If you took a regular distribution, your financial institution will likely issue a standard Form 1099-R with Code 7 (normal distribution) or Code 1 (early distribution) because they are not aware of your financial situation.

The Form 1099-R has to have specific codes. Therefore, if you were issued a standard Form 1099-R with one of the above codes, you will need to contact your financial institution to request that they issue you a revised Form 1099-R with a Code reflecting a "Return of Excess Contributions", which are primarily Code 8 (current year), or Code P (prior year).

While you wait to receive your revised Form 1099-R, you will be able to enter your transactions by creating a substitute Form 1099-R, by doing the following:

Go to Wages & Income on the left panel within your TurboTax account
Click on the +Add more income box
Scroll down to Retirement Plans and Social Security and click the down arrow to expand
Click Start to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R)
Click on +Add a 1099-R (Here, you may import or type in by selecting the Change how I enter my form box
On the next screen, you can select Type it in myself, or other options, then Continue
Select the box on the top left for Financial institution or other provider (1099-R), then Continue
Enter the provider's information, then Continue
Enter the deatils from your Form 1099-R, checking for which Distribution Code was used in Box 7 (or review if imported), then Continue
Continue answering the questions, pressing Continue to advance
When you reach, "Do any of these situations apply to you?", select the third box down "I need to file a substitute 1099-R", then Continue
You will then enter the calculations for the substitute amounts, as well as an explanation, then Continue
Select Skip when complete if you are e-filing your return, or select Print Form 4852
Answer the remaining questions, then Continue

Re: Excess 401k Contributions

Joearby — Mon, 09 Feb 2026 17:55:42 GMT

thank you so much for the detailed reply. I will wait until I can import my 1099 from my bank and then see if that doesn't clear things up. Not sure if it makes a difference but since I am past retirement age, it would be considered a "normal" distribution. I was really just trying to put back some funds that I took out but since I didn't do it in the 60-day window it's obviously treated differently than a "replenishment.

Joe

Re: Excess 401k Contributions

Joearby — Thu, 12 Feb 2026 15:26:59 GMT

Follow-up questions. Since I am the plan administrator, can I recharcterize my excess contributions from last year from employee to employer contributions and apply them to 2026 tax year?

Thanks in advance

Re: Excess 401k Contributions

CesarJ — Mon, 16 Feb 2026 15:40:58 GMT

Generally, no, you can't recharacterize excess 401(k) employee deferrals as employer contributions for a prior year, even if you are the plan administrator.

You also can't simply apply last year's excess to a future year. Contributions must be allocated to the year in which they were actually made and subject to that year's limits.

Re: Excess 401k Contributions

Joearby — Tue, 24 Feb 2026 17:08:33 GMT

Thank you again, but after contacting my financial inst. (Schwab), they indicated that this situation would not require a revised 1099-K for 2025, but for me to take a distribution in 2026 for which I would receive a 1099-R with a "P" for return of previous year excess contributions. So this raises two questions:

1. What is the tax implication for 2025 - will I be taxed again on the excess contributions for 2025 but then get a refund on them when filing for 2026?

2. Not sure how to document this situation within Turbo Tax for my tax return.

Joe

Re: Excess 401k Contributions

MarilynG1 — Thu, 26 Feb 2026 00:38:11 GMT

You will be taxed on the excess 401K contribution in 2025. You must still report the excess as income in the year it happened, and enter the 1099-R in the year you receive it.

Report as Income: Go to Wages & Income > Less Common Income > Miscellaneous Income, 1099-A, 1099-C > Start.
Add Income: Select Other income not already reported on a Form W-2 or Form 1099 > Start.
Answer Questions: Answer "Yes" to "Did you receive any other wages?" and continue to "Any other earned income".
Enter Details: Enter a description like "2025 Excess 401(k) Deferrals" and the amount

When you receive a 1099-R in 2026 it should have code P in box 7. This makes the amount non-taxable on your 2026 return because it was already taxed in the previous year (except any earnings added).

@Joearby