Reporting 2022 Excess Roth 401 Deferral taken at March of 2023

[jy99999]

I over-contributed to my Roth 401K plan for tax year 2022 due to switching jobs in mid-year. While working on the 2022 tax return using TurboTax Desktop software, it warned me about it. So I held off filing the 2022 tax return and requested the deferral. I received a check of $5500 from Vanguard showing Excess Roth Deferral ($5000) and Allocable Income ($500) in mid-March 2023. The letter that came with the check mentioned how I'll receive two 1099-R forms in January of 2024 and if I filed a 2022 return without including the pre-tax amount of excess deferrals as taxable income (line 7)), I will need to file an amended return for 2022.

Since I'm yet to file my 2022 tax return, is there something that I need to do on TurboTax 2022 to report the Excess Roth Deferrals I've received before I wrap up my 2022 tax return? Some of the Q&As on reporting excess 401k deferral mentions reporting it as Miscellaneous Income with description of "2022 Excess 401k Deferrals" but I'm wondering if this is something that you would do if the deferral was for pre-tax contribution. Am I right on this? Would there be anything to amend for 2022 when I receive the 2023 1099-Rs in January of 2024?

[DanaB27]

To verify, do you mean you made after-tax contributions to your Roth 401(k)? Contributions to a Roth 401(k) are made from income that was included in the gross income and was taxed. Therefore, it is an after-tax contribution. Please see IRS Retirement Topics - Designated Roth Account for additional details. 

If you made after-tax contributions then you do not need to include the excess contribution on your 2022 tax return because it was already included. 

Yes, you should receive two 2023 Form 1099-R:

• If the distribution was for a 2022 excess deferral to a designated Roth account, your Form 1099-R should have codes B and P in box 7. Don’t add this amount to your wages on your 2022 return. 
• 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 2023 income tax return, regardless of when the excess deferral was made.

Please see Pub 525 for more information.

Pre-tax excess deferrals to a 401 (k) have to be included in your wages with these steps:

1. Login to your TurboTax Account 
2. Click "Wages & Income" (under Federal) on the left side of your screen
3. Scroll  down to "Less Common Income" and click "Show More"
4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
5. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
6. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
7. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
8. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
9. On the "Any Other Earned Income" screen enter "2022 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

[jy99999]

Thank you for your response!  Box 12 on both of my 2022 W-2s  shows my 401k contributions with code AA (Designated Roth contributions under a section 401k plan) and I believe it means all my 401k contributions were after-tax contributions. Please, let me know if this is not the case.  Thanks again!

https://www.irs.gov/instructions/iw2w3#en_US_2023_publink1000308380

Code AA—Designated Roth contributions under a section 401(k) plan.

 Use this code to report designated Roth contributions under a section 401(k) plan. Do not use this code to report elective deferrals under code D. See Designated Roth contributions .

[DanaB27 · Accepted solution]

Yes, you made after-tax contributions and therefore don’t need to add the excess contribution to your wages on your 2022 return. You only will report the earnings next year on your 2023 tax return when you receive 2023 Form 1099-R with code 8.

@jy99999

[dmertz]

Nothing about this goes on your 2022 tax return.  The 2023 Form 1099-R that shows the $500 taxable gain will be reportable on your 2023 tax return and will increase your taxable income by that $500.