My wife is a teacher, she over contributed to her 457 and 403b (excess deferral) in 2018. The excess deferral was flagged in early 2019 and payer was notified. Refund (reflecting market loss) was received before April 15th 2019. I have included the exact amount of excess deferral before any loss in my income for 2018. This year ( February 2020), I received two 1099-R for tax year 2019 from the two plans. My 403b 1099-R was exactly as expected, box 1 has the gross distribution (after loss) and box 2a has the exact excess deferral amount before any loss, and box 7 has code P as expected. As for the 457 1099-R, both boxes 1 and 2a has the same amount (Gross after loss), box 7 has code 8 and 2nd box in 2b was checked. Based on my research I thought this 1099-R is not correct so I contacted the payer. The payer claimed that since the plan is 457 (different than other plans), code P can never be used, only code 8 can be entered. And that the payer only have to report the Gross amount after loss, not the exact excess deferral because the gross amount is the taxable amount. They even checked the 2nd box in box 2b, even though the account is not closed. I am trying to find out if the payer is simply not qualified to do 1099-R or if I am missing some information. I was not able to find the information on IRS.gov, every thing I saw supported my expectations which is the same as the 403b 1099-R. your help is appreciated. Not sure what do now as turboTax will tax me twice if I enter code 8 and I am afraid that the value in box 2a is simply not correct as it can not be the Gross amount (after gain/loss), it has to be the original exact excess deferral. Any idea how disagreements like this are resolved.
