Steps to take to remove an excess salary deferral?

[Rachel_W · Accepted solution]

If you haven't done so already, you will need to contact the Financial Institution holding your account to distribute the excess salary deferral.

If the excess deferral occurred in 2017, you can report the excess contribution on line 7 of your 2017 Tax Return without a Form 1099-R by following these steps: 

• Click on the "Federal Taxes" Tab
• Click on the "Wages & Income" Tab
• Click on "I'll choose what I work on"
• Scroll down to "Less Common Income"
• Select "Miscellaneous Income" and click Start or Update
• Select "Other income not already reported on a Form W-2 or Form 1099" and click on Start
  
• Answer the Question "Did you receive any other wages?  Yes
  
• Click through the questions until you get to "Any Other Earned Income"
• Answer Yes to "Did you earn any other wages?
• Indicate "Other" as Source of Other Earned Income and click Continue
• For the description enter "2017 Excess 401K Deferrals" and click on Done

[goducks413]

Is this the same for tax year 2019?  I've recently contacted my financial institution (haven't received anything back yet).  Should I still follow the same steps below in the interim but edit it to say 2019?

[VictoriaD75]

Yes. Follow the steps listed above for 2019. Be careful to include the proper amount.

[digi]

Hi,

I'm using 2019 desktop Home and Business version, I found there is no Federal tax tab anywhere. So how should I report the excess contribution on line 7 of 2019 Tax Return without a Form 1099-R.

[DavidS127]

In TurboTax Home and Business, instead of a Federal tab there are Business and Personal tabs.

More information about the excess contribution you are trying to report would help resolve your issue.  For example, what is the excess contribution you are trying to report on your 2019 tax return and when was that excess contribution made?

[digi]

As a result of getting a new job in 2019, I accidentally put more $1000 over the allowed amount into my 2019 401k. I don’t have Form 10990-R now as the correction will happen in 2020. But I need to report this excess contribution in my 2019 Tax Return. That is why I try to find a way in Turbo Tax to indicate it.

[macuser_22]

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@digi wrote:

As a result of getting a new job in 2019, I accidentally put more $1000 over the allowed amount into my 2019 401k. I don’t have Form 10990-R now as the correction will happen in 2020. But I need to report this excess contribution in my 2019 Tax Return. That is why I try to find a way in Turbo Tax to indicate it.

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The correction "will happen" in 2020?   You can report it on your 2019   tax return and not have to amend when you get the 1099-R, but you should have the excess returned before reporting it on a 2019 tax return.

You only enter the excess and NOT any earnings on the excess.   Earnings, if any, or losses are reported on your 2020 tax return next year.

Excess 401(k) deferrals should be reported in:
(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.

[fredlicn]

I think the method listed in this post will work but ended up using the steps listed in another post:

https://ttlc.intuit.com/community/taxes/discussion/steps-to-take-to-remove-an-excess-salary-deferral...

They are the same steps as those listed by TurboTax in its built-in contextual instructions for "Steps to Take to Remove an Excess Salary Deferral".

The two methods seem to me have the same calculations and lead to the same federal/state return numbers.

[macuser_22]

Either method does the same thins but there is more room for error when using a 1099-R (many people get confused with the "choose the year the 1099-R is for" question and answer wrong, then it does not work.)