In march 2024, received a check as a result of excess contribution to 401(k). The contributions were made in 2023. I took the option of including the distribution amount as miscellaneous income on my 2023 return with the intention of recording the withheld taxes on my 2024 return since those were paid in 2024.
I received a 2024 1099-R that shows the correct amount of the excess contribution in Box 2 BUT the form includes the code "8" in Box 7. I believe the code should be "P".
Additionally, the taxable amount in box 2a is listed as the full amount of the excess contribution (distribution) as if it would be taxable in 2024 and not 2023.
So I believe the 1099-R is incorrect and should have a "P" code in Box 7 and no $ amount shown in Box 2a.
Am I correct and do I need a corrected 1099-R?
Only the income earned on an excess deferral should be reported on the 2024 Form 1099-R with code 8. A distribution that was for a 2023 excess deferral returned in 2024 should be reported on the 2024 Form 1099-R with code P. Please see Pub 525 for details. You will have to contact the custodian about correcting the Form 1099-R.
"You must include the excess deferral in your income for the year of the deferral." (Pub 525)
"Any income on the excess deferral taken out is taxable in the tax year in which you take it out." (Pub 525)