How to report excess deferral s 401k contribution?

[Jindalanshul28]

Last year (2024) I have excess contribution in 401k. I still haven't filed the tax return for 2024. I have already withdrew the excess deferral amount from my 401k account but still haven't received 1099-R form. So how should I report this to my 2024 tax return ? 

What else I need to do to report my excess deferral amount to IRS ?

[MinhT1]

You will not receive a 2024 form 1099-R.

Report 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 as Wages.  Do not create your own 1099-R for this situation.

Page 11 of IRS Pub 525 under Excess deferrals (the IRS term for 401K contribution is deferral) tells us: 

If your deferrals exceed the limit, you must notify your plan by the date required by the plan. If the plan permits, the excess amount will be distributed to you. If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. The plan must then pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. You must include the excess deferral in your income for the year of the deferral. File Form 1040 or 1040-SR to add the excess deferral amount to earned income on line 1h.

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 Online:

1. Click on Federal in the left-hand column, then on Wages & Income
2. Navigate to the list of income categories
3. Locate the section Less Common Income
4. Select Miscellaneous Income and click Start
5. Select Other income not already reported on a Form W-2 or Form 1099 and click on Start
6. Answer the question "Did you receive any other wages?  Yes
7. Click through the questions till you get to Any Other Earned Income
8. Answer Yes to Did you earn any other wages?
9. Indicate Other as Source of Other Earned Income and click Continue
10. For the description enter "2024 Excess 401K Deferrals" and click on Done

[Jindalanshul28]

I am still a little confused.

Are you saying that I don't need to report anything in 2024 Tax Return I am filling to IRS right now in 2025 ?

I only need to report this in 2025 Tax return which I will file in 2026 ? 

[RobertB4444]

No.

You're going to report the additional amount that you put into the 401K and then pulled out as wages for this year.  You got a deduction for that amount but you shouldn't have since you weren't allowed to deduct it.  So report the extra amount as income on your return. 

You can do that by entering it into the wages and income section and following the steps that @MinhT1 outlines above.  

That is all you need to do for your 2024 return.

Then, for 2025, you will receive a 1099-R.  You'll report that at that time.

@Jindalanshul28 

[kristina72]

My husband has a similar situation due to changing jobs at the end of the year resulting in a $990 excess deferral amount for tax year 2024. He has received the excess distribution however will not receive a 1099-R prior to filing our 2024 tax return.

As I'm completing my taxes on turbo tax I'm receiving conflicting information on how to report this excess amount. 

On the screen where it informs me there is an excess deferral amount when I select "What Steps do I need to take" the guide informs me "Report the excess deferral on your 2024 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 2025 Form 1099-R."

I'm looking for clarification if this is reported as income for Retirement Plans and Social Security or if it is reported under "Less Common Income".

Thank you

[RobertB4444]

Report it in retirement plans and tell the system that you need to create a 'substitute 1099R'.  That will trigger all the help you need.  You will also be able to enter all of the information that you have ready there.

When you do receive the 2025 1099-R then you can ignore it.  You will have already reported it.

@kristina72 

[Isugrads]

Was clarification ever provided on this? As Kristina noted, there is conflicting info on how to handle this in the forum thread here. I also have an excess deferral situation from 2024 and the excess was distributed in March but I will not be getting a 1099R this year for it.. Do you handle as Miscellaneous Income as Minh noted or do you create a 1099R and put amounts in Box 1 and 2a with a code P in Box 7?

[RobertB4444]

You can really do either.  As long as the income is reported on the 2024 return so that you can show that the money was pulled before the due date of the return.  Obviously, I am partial to the 1099-R method but @MinhT1 's way gets the job done as well.

@Isugrads 

[markrocknroll]

so I have the same situation. plan on reporting it in the retirements plan section. what I'm confused about is what code I use in box 7. is it "P" or "8". what is the difference with these two codes? if I take care of it now, can I ignore the 1099R I receive in 2026? thanks.

[RobertB4444]

Code 8 is for an overcontribution made and removed in the same year.  Code P is for an overcontribution from the prior year that is being removed in this year.  Use the code that is applicable to your situation.

If you have entered this information on your 2024 return then the 1099-R that you receive next year should match the fake one you're entering now.  As long as the numbers match you get to ignore it next year.

@markrocknroll 

[JSBruno4]

Hi, i read your post and had a question.

I had overcontributed to my 401K by $2,110. I already submitted for the excess deferral and the amount was removed. When doing the "1099-R" way Box 1 (Gross distribution) would be $2,110. But what would I fill in Box 2a (Taxable amount)? Would it also be $2,110? 

Thank you for any help on this @RobertB4444 

[markrocknroll]

Ok, so since the over contribution was in 2024 but I received the money back in March 2025 I use code "P"? Or since I am taking care of this before the April 15, 2025 deadline and it's all being done on my 2024 tax return it is code "8"? this is the heart of my confusion.  thanks.

[DawnC]

Yes, Box 1 and 2a would both be $2110.  @JSBruno4 

[DawnC]

You want to use code P and enter it as 2025 Form 1099-R.   Since you took the excess out in 2025, the 1099-R will be for tax year 2025, but you need to report it on your 2024 return, which is what code P (taxable the prior year) does.

Code 8 would be used if you got the excess out in 2024 and received a 2024 Form 1099-R (an excess contribution made and withdrawn in the same year).   But since you took the excess out in 2025, the 1099-R will be for tax year 2025 and you will use Code P.   TurboTax will ask what year the mock 1099-R you are entering is for - you will answer 2025 since the distribution was done in 2025.  @markrocknroll 

[markrocknroll]

Hopefully this is my last question.  So the excess amount is $3900 and the earnings were ~$200. Do I just report the excess amount this year and the earnings next year or do I report the excess amount and earnings this year?