Overcontribution to solo 401K, how to report on Turbotax

[az2324]

Hello,

I have a W-2 job, but I also earn 1099 income. I have 401k plan with my employer for my W-2 job, and I have a separate solo 401K plan that I use for my 1099 income.

For my W-2 job, I contributed the maximum allowable to my 401k plan for 2023 ($22,500).

After starting my taxes for 2023 using the Turbotax Desktop, I realized I over-contributed to my solo 401k plan by $25, and earned $3 on that while in the plan. I already filed with Fidelity the overcorrection this week which is being withdrawn.

Since I haven't filed my 2023 taxes, I just need help on how I should report the contribution and over-contribution on the Home & Business Turbotax 2023.

1) Under "Less Common Business Situations" and then "Self-Employed Retirement," do I report what I contributed to the solo 401K plan including the over-contribution or do I deduct the over-contribution from that amount in that section? 

2) In the same section where the contribution amount is placed, does my contribution to the solo 401K go under "Elective Deferrals" or "Employer Matching" since I maxed out my W-2 employee 401K plan?

3) How do I report an overcontribution to my solo 401K plan I use for my 1099 work in the Turbotax Home & Business Desktop?

Appreciate any help!

Thanks!

[dmertz]

The excess was an excess elective deferral.  Because you maxed out the elective deferral at your W-2 employer, you are ineligible to have made any elective deferral to the solo 401(k), leaving only the employer matching contribution as the amount that you are eligible to have contributed to the solo 401(k).

When entering your solo 401(k) contribution into TurboTax in the self-employed retirement section, it would probably be safest to just enter the net amount contributed (original amount contributed minus $25) as a SEP contribution since this will cause TurboTax to limit your deduction to just the amount of employer contribution permitted and enter the $25 (and the $3 of earnings) nowhere.  If you instead enter the net contribution in the box for employer contributions to an individual 401(k), TurboTax will not enforce the employer contribution limit under these circumstances.

Given that Fidelity returned the contribution along with $3 of gains in 2024, the $3 will be reported on your 2024 tax return.

[az2324]

Thank you so much! 

Yes so I over-contributed to my employer contributions to my solo 401K (miscalculated how much I could contribute as an employer by $25).  I don't see any way to document that in Turbotax. The only option I saw for reporting it in TurboTax for 2023 is the employee elective deferrals, which this was not the case, which I think you were describing.

So there is no need to report the solo 401K excess contribution in my 2023 taxes, as long as they are filed in my 2024 returns? Since then I will receive my 1099-R for 2024 and again I don't see any way to report it. 

I am not great with Turbotax and couldn't find the SEP contribution, but I did find this website which does a great job of calculating the maximum. 

[dmertz]

Both the individual 401(k) and SEP contribution entries are in the same self-employed retirement section of TurboTax under Business Deductions and Credits (under Wages & Income).  Answer Yes to an individual or Roth 401(k), make sure all boxes on the next page are blank, then answer Yes to a Keogh, SEP or SIMPLE contribution, enter your employer contribution as a SEP contribution, then confirm that the self-employed retirement deduction on Schedule 1 is the same as what you entered as a SEP contribution.