Excess 401K contribution and corrected W-2c form
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Level 2

Excess 401K contribution and corrected W-2c form

My wife over contributed to her 401K plan in 2019. Her employer sent her W-2c corrected form with the new amount in box 12 and updated State Income Tax in box 17. My wife's pension plan sent her 2 checks: one with the excess amount and another one with earnings on this amount. We received these checks in February 2020.

Question #1: Is there any way to enter a corrected W-2c form in TurboTax or should I just correct amounts in  box 12 and box 17 myself?

Question #2: Should I report the excess contribution amount on 2019 or 2020 Tax Return? The same question is for earning amount. How to do that in TurboTax?

4 Replies
Employee Tax Expert

Excess 401K contribution and corrected W-2c form

1. To enter the corrected W-2, you only correct the amounts in box 12 and box 17 in TurboTax.

 

2. Reporting excess salary deferrals (excess 401k contributions) returned to you after the end of the tax year but by April 15th of the following tax year on your 1040.  Do not create your own 1099-R for this situation.

 

Page 10 of IRS Pub 525 under Excess deferrals (the IRS term for 401K contribution is deferral) tells us to include the excess deferrals as income on line 7 of Form 1040 if the money was returned after the end of the tax year but by April 15th of the following tax year.  You need to report only the excess contribution, not any money generated by the investment of the excess contribution.  What you earned will be covered by a 1099-R for the following tax year and will be entered then as a normal 1099-R.

 

Below is how to do this in TurboTax:

  • Click on Federal in the left-hand column, then on Wages & Income
  • Under All Income, scroll down to Less Common Income
  • Select Miscellaneous Income and click Start
  • 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 till 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 "2019 Excess 401K Deferrals" and click on Done
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Level 2

Excess 401K contribution and corrected W-2c form

Thank you very much for your reply! 

I have another question though. On my wife's W-2c (corrected) form, State Income Tax amount was higher than it was on W-2 original form because the excess 401k deferrals were eliminated in W2-c. Will the difference be reconciled in 2020? If so, how will it be reconciled? 

Thanks a lot again!

Expert Alumni

Excess 401K contribution and corrected W-2c form

Since you have corrected the amounts on your w-2 form, the correct amount of state tax has been reported on your 2019 return. Therefore, it will not be reconciled on your 2020 return.

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Returning Member

Excess 401K contribution and corrected W-2c form

I entered this where you said but it did not add it to line 7 of the 1040

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