Overcontribution to 401K, got distribution but had loss, or wait to amend in 2025?

[Cat_Sushi]

I had 2 jobs in 2023 and caught over contribution to 401K of $3,500 for 2023. I requested the refund, and got the check back 3/15/24. However, there was a $15 loss. The check they mailed me was around $3,485. 

1) When I enter my Miscellaneous Other Income for 2023 taxes. What number should I be putting in as part of the excess deferral contribution? $3,500, or the $3,485? 

2) In 2025, when I get my 2 extra1099 (distribution + gains/loss) forms do I ignore both of them? Considering I would have paid additional taxes due already and also the other form would be for a loss? 

3) IF I don't do anything this year and wait for the 1099 to hit, do I need to amend any taxes? Both federal and California or just Federal?

I would prefer the less messy solve, so wondering if it's best to account for the payment check this year upfront or wait till 2025 to handle. 

TIA!

[DanaB27 · Accepted solution]

You will enter $3,500 as excess deferral.

Please follow the steps below:

1. Login to your TurboTax Account 
2. Click "Wages & Income" (under Federal) on the left side of your screen
3. Scroll  down to "Less Common Income" and click "Show More"
4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
5. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
6. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
7. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
8. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
9. On the "Any Other Earned Income" screen enter "2023 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

Please note for the Tax Year 2024 tax filing due April 15, 2025: 

• 2024 Form 1099-R with Code P in box 7 can be ignored if you reported the excess as described above in 2023. 

The loss will have to be reported on your 2024 tax return:

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Scroll down to "Less Common Income" and click "Show More"
4. Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
5. Select "Other reportable income" and click "Start"
6. Answer "Yes" to "Any Other Taxable Income?"
7. Enter "Loss on Excess Deferral Distribution” and enter the loss as a negative number (-$15)

Please see Pub 525 for additional information.

[Cat_Sushi]

Following up on my post from last year.  I did end up entering excess deferred for 2023 taxes. I just got the 1099 R from the 401K. Compared to what I reported, it's a $17 loss (vs $15 from my initial post).

Question is, 1) do I NOT enter in this 1099R at all in the normal "retirement" section of Turbotax 2024, since  it seems to bump up my whole taxable amount this year when I enter it?

2) Then do I ONLY just follow original guidance to claim my $17 loss in the "less common income (loss)" section as originally guidance suggested? 

3) also do I HAVE to report the loss? Just don't want to cause more of a mess for $17, but if it will lead to more accounting deltas in the future, I might as well add in the loss?

Thanks in advance for any additional guidance!

[DanaB27]

1. Yes, you do not need to enter the Form 1099-R with code P since you reported it already correctly on your 2023 return.

2. Yes, you would use the $17 loss instead of $15.

3.  Yes, you should report the loss. (IRS)