Since your wife's employer already sent a corrected W-2, most of your reporting for the 2025 tax year is simple. You don’t need to wait for the physical check or the 1099-R to file. Here is how this should be handled.
You should enter the Corrected W-2 (W-2c) into your tax software exactly as it is written. The corrected W-2 should show higher "Wages, Tips, Other Compensation" (Box 1) because the excess contribution is no longer being excluded from her income. By filing this, you are paying the 2025 income tax on that excess amount now.
Do not report the "Return of Excess" yet. Corrective distributions are reported in the year they are paid. Since you are receiving the check in 2026, the 403(b) provider will issue a 2026 Form 1099-R next January. Because you used the corrected W-2 for 2025, you have already paid the tax on the principal. When you get the 1099-R next year, it will have a code (likely Code P) that tells the IRS: "This money was already taxed in 2025."
One last thing. The check you receive will include the excess contribution PLUS any interest/earnings it made while in the account. You will report those earnings on next year’s tax return using that future 1099-R. When you receive the 1099R, Box 1 will report the entire distribution, but Box 2A will report the amount of the earnings/interest. Box 2A will be the taxable amount of the earnings, if there were any.
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