Excess deferral to 401k for 2019 taxes

[krishna3]

Turbo tax says :

Report the excess deferral on your 2019 return in the Income section for Retirement Plans and Social Security whether or not you received a Form 1099-R before you file your return. Enter as much information as you can. Report the excess deferral amount in boxes 1 and 2a, and use code P in box 7. Indicate that this is a 2020 Form 1099-R.

How do we do this ? - All previous answers point to a bug ?

I am using Turbo Tax online Deluxe

[MinhT1]

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

[krishna3]

https://ttlc.intuit.com/community/retirement/discussion/turbotax-won-t-let-me-efile-because-my-two-w... - This points to a bug that prevents e filing 

Has it been fixed?

[MinhT1 · Accepted solution]

The excess contribution prevented e-filing last year. 

It should not a problem this year.

[wine4don]

I'm using the desktop version - I don't see where I can add these comments - just the box to put in the $ amount.  and  enter it twice since it is taxable ( I received my over payment check.)

It defaults to sick or disability pay?

•  "2019 Excess 401K Deferrals" and click on Done

[birds45]

Thank you for your post.  Question - your suggestion appears to me to be in conflict with TurboTaxes suggestion (it's a auto pop up when it realizes you've overcontributed to a 401k).  They say "Report the excess deferall on your 2019 return in the Income section for Retirement Plans and Social Security whether or not you received a Form 1099-R before you file your return.  Enter as much information as you can.  Report the excess deferral amount in boxes 1 and 2a, and use code P in box 7.  Indicate that this is a 2020 Form 1099-R."  I believe TurboTax is saying to create a 1099-R in your 2019 tax submission, while i believe you said do NOT create a 1099-R.  Can you explain?

[DaveF1006]

If you indicate that you will return the excess before 04/15, don't do anything at all.  You will be issued a 1099R in 2020 and you will report it then.  i know that some experts are saying to create a 1099R this year and fill out as much information as you can but don't do this because when you do receive your 1099R next year, it can create a big mess.

[birds45]

Thank you for your response.  As you can see, this situation is a bit more complicated and subjective than it seems.  In this thread, I see 3 different suggestions (#1 do nothing until 2020 tax return is filed, create a 1099-R in TurboTax in my 2019 filing, or report as "any other earned income" in my 2019 filing). 

I'm confused, I'm just trying to pay exactly the tax that I owe (and certainly no more than that) and create as little headache as possible.

Maybe sharing my specifics will help.  The background to this was that I had 2 employers (I changed jobs so I went from Firm X to Firm Y) in 2019 so i had 2 different 401k plans and over-contributed by $1k (instead of a max of $19k, i put in $20k) into my 401k in 2019.  In January 2020 I realized the my mistake, so I got my 401k plan administrator to issue me an excess contribution check for the $1k (the check was for $1,100 because there was earned income on the $1k).  I cashed the check in February 2020.

The issue that Dave brings up makes sense.  TurboxTax's advice is basically saying make-up a "fake" 1099-R for 2019, but I will never get a 1099-R for 2019, actually I will get 2 1099-Rs in 2020 and I know this because I can already see them on my 401k plan's website.  So i feel like the IRS will get confused by this (because I'd be creating forms that they wouldn't have a record of).  I am leaning towards doing nothing for this in 2019 and waiting until 2020 when i have the 1099-Rs (like Dave suggested), or the other best option as I can see it is to put the deferral amount ($1k) as an "any other earned income" on my 2019 return and leave the $100 in earnings amount until my 2020 taxes are due. 

I'm still confused as what's the best path forward.  Any further thoughts/comments would be appreciated.  Thanks everyone.

[scdw]

I have the same situation, but on the letter included with my deferral refund, it explicitly states that the deferral is taxable in 2019 and the earnings are taxable in 2020. On my plan's website, it shows the two 1099-Rs, one for the deferral with code P and one for the earnings with code 8.

Code P means it is a return of contributions from the previous year and Code 8 means it is a return of contributions from the current year.

When you file your 2020 taxes and you enter the one with Code P, that amount will NOT be added to your 2020 taxable income. You can test this yourself right now by making a 1099-R and selecting box P and keep going though the steps and if will ask if it is a 2019 1099-R or a 2020 1099-R. If you select 2019 (current year), you will see your estimated refund does not change. If you select 2020 (next year), it will count it as taxable income for 2019 as it is supposed to. So next year when you enter that same 1099-R again, it will ask you if it is for 2020 (current year) or 2021 (next year). You will select 2020 (current year), it will NOT be counted as taxable income again and you will not need to amend you 2019 taxes because you already reported it and paid the taxes.

[RutherfordG]

I have the exact same situation as described in this thread.  I am curious why we are guided to select Code P and not Code 8.  In Turbo Tax Premier 2019, Code P says "Return of contribution taxable in 2018".  Code 8 says "Return of Contribution Taxable in 2019".  Isn't this a return of a deferral that is taxable in 2019?

[bakoenigsberg]

Does the April 15th deadline still exist or is it extended to July 15th due to the pandemic relief?

[BillM223]

@bakoenigsberg

In Notice 2020-23, the IRS extended the due date for most actions due between April 1, 2020 and July 14, 2020 (including distributions of elective deferrals) to July 15, 2020.

So your new due date is July 15, 2020.

[Jenepho]

I called my firm's brokerage firm and was told that the Returns of Excess Contributions couldn't be done because the deadline was April 15th, has anyone had success getting the excess deferral back for 2019?

[jackFF]

I agree about the confusion too - why do I pay TT to get such mixed advice??? and no one answered your question (only someone to say that dates were postponed to July) ... I still don't know what to do and TT is silent

[RutherfordG]

Not an expert - I asked a question earlier in this thread (early June) and can give you my experience.  I switched jobs and as a result had excess taken out in 2019 which I discovered in late May when I started my taxes.  HR at my job was able to confirm the deadline was extended and provided support of that result to Fidelity, who cut me a check for the excess plus the earnings. 

Beyond that I had to make a judgement call given the information I received.   Specifically, I followed the advice from MinhT1 that was posted on March 2, 2020.  That expert referenced Page 10 of IRS Pub 525 under Excess deferrals. (search for it).  I reported the excess deferral as income this year (line 7 of form 1040) and will report what I earned on the investment next year (I'll receive a 1099-R for that).  Note that I will evidently also receive a 1099-R for the deferral but will ignore it because I have already reported the earnings.  Again - lots of suggestions on how to deal with it...I found a method that I thought made the most sense suggested by an expert and went with it....Good luck