401k excess contribution box 7 code

[seewetz]

I changed jobs in 2020 and over-contributed to my 401K and the money was returned to me in March of 2021.  It does not make sense to me why i would select Code P for box 7 (excess contributions taxable in 2019) instead of code 8 (excess contributions taxable in 2020).  I have researched this and it doesn't make sense...none of this happened in 2019 so why would i enter that and go back and amend my 2019 taxes?

[DanaB27 · Accepted solution]

To report the excess 401(k) contributions and subsequent distributions, a 2020 plan excess distributed in 2021 is reported on line 1 of your 2020 Form 1040:

1. Open your return
2. Click "Federal Taxes" on the top 
3. Click on "I'll choose what I work on"
4. Scroll  down to "Less Common Income" 
5. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
6. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
7. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
8. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
9. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
10. On the "Any Other Earned Income" screen enter "2020 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

Please note for the Tax Year 2021 tax filing due April 15, 2022: 

2021 Forms 1099-R will be issued reporting the excess.

• Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2020. 
• However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2021.

For your information:

Code P will be used on your 1099-R Form because on a 2021 1099-R code P will mean "Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2020". TurboTax will ask what year is on the form during the interview when you enter a 1099-R with code P.