2022 Excess Contribution Return - Amended Return Help Needed

[AMS2022]

Hi TurboTax experts!

My wife and I, filing jointly, have run into an issue on excess contribution.  Details are:

1. Wife was employed in 2022, retired Oct. 2022.

2. She was contributing to a 401(k) plan.

3. After retirement, she rolled over (100 %) the 401(k) to a Traditional IRA.

4. We filed our 2022 Joint Return in March, 2023.  Return accepted, due taxes paid.  Same for State Taxes.

5. In May 2023, we received notification that there was an excess contribution to the 401(k), which is now the IRa funds.

6. Excess amount was $2900.98 and earnings on that were $50.19 - total $2,951.17.  

7. Requested this excess contribution be distributed - received July, 2023.

8. Are being told 1099-R will be issued in Jan 2024.

9. But we want to Amend the 2022 Returns by Oct. 15, 2023 which is the automatic extension - so that we are done with this issue.

Q1. What do I do without this 1099-R to amend the tax return for the amounts above?

Q2. Can i generate my own 1099-R?  If so, what codes do I use/input?

Q3. Any other tips/pointers?

Any help from the experts will be greatly appreciated.

Filing was done online in TurboTax.

MANY THANKS!

AMS

[guywong]

Your hunch is correct.  You should amend your 2022 tax return.  The 1099-R you will receive from the 401(k) administrator in Jan 2024 will have a Distribution Code P in Box 7 (Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2022.)  See page 7 of the 2023 1099-R, linked below.  

https://www.irs.gov/pub/irs-pdf/f1099r.pdf

I found this answer to an earlier question.  It was on a 2018 excess contribution with a 2019 1099-R with a Distribution Code P

https://ttlc.intuit.com/community/taxes/discussion/1099-r-code-p-what-to-do/00/1442903

macuser_22 

Level 15

A code P on  a 2019 1099-R means it was a 2018 excess returned in 2019.   The excess must be reported as returned wages on an amended 2018 tax return.  Entering the code P in to the 2018 software will ask if it is a 2018 or 2019 1099-R - say 2019 and the box 1 amount will be added to the 2018 1040 line 1 as wages.

[AMS2022]

Thanks for taking the trouble to respond.

I am wanting to file my Amended Return before Oct. 15, 2023 and so would prefer to not wait until the 1099-R is issued in Jan. 2024.

So my hope was to get enough help and clarity as to how to go back into Turbotax, Amend my 2022 Return by adding this Excess Contribution just distributed and pay the additional tax and be done with it.

I am not clear on what all i need to in Turbotax, how to “self-generate” the 1099-R (with the right inputs for each box entry) and go about finishing the Amended Return.

I will hope there will be additional input to help me get those answers.

Thanks for your input!

[guywong]

You don't need an actual copy of the 1099-R as you don't need to attach it to your amended 1040X tax return.  So I don't see why you couldn't amend the 2022 tax return now as you should know the employer name, address, ID#, amount, distribution code, etc on the 1099-R.  So just enter them into TurboTax.  Based on what you wrote in the OP, I'm pretty sure your wife's 2023 Form 1099-R will have a P Distribution Code in Box 7.  But you should contact HR at her former employer to make sure that's the case.   

I'm no TurboTax expert.  Here's a previous answer to a similar question:

https://ttlc.intuit.com/community/after-you-file/discussion/where-do-i-enter-1099-r-code-p-when-amen...

A 2018 1099-R with a code "P" in box 7 is taxable in 2017, the year the contribution was made, not 2018.

You must amend 2017 to report it. The 2017 1099-R interview will say that code P means "Return of contribution taxable in 2016", but the interview will ask if this it a 2017 1099-R or a 2018 1099-R. Say 2018 and the "taxable in 2016" becomes "taxable in 2017" (the year advances by 1 each year).

It is not reported in 2018 unless there were earnings in which case the earnings should be reported on a separate 2018 1099-R with a code 8 on box 7 to be reported in the year the earnings were returned.

The end result is that you will increase taxable wages by the amount of the excess 401(k) DEFERRAL in the amended 2022 tax return on Line 1 of the 1040.  The earnings are taxed in 2023.  

https://www.irs.gov/instructions/i1099r#en_US_2023_publink[phone number removed]

Excess deferrals.

Excess deferrals under section 402(g) can occur in section 401(k) plans, section 403(b) plans, or SARSEPs. If distributed by April 15 of the year following the year of deferral, the excess is taxable to the participant in the year of deferral (other than designated Roth contributions), but the earnings are taxable in the year distributed.

[AMS2022]

Dana - @DanaB27 

Mike - @Mike9241 

@macuser_22 

Hi all - sending this plea for help to you all as I saw you’ll have responded to similar issues.  

I am specifically trying to figure out what ALL the boxes in the 1099-R I create in TurboTax for the Amended Return will look like.

Any input is gratefully appreciated!

Thanks,

@AMS2022 

[fanfare]

"P" is for prior and that is what you will see next year telling you to amend the prior year.

This year you want a second distribution code of "8".

that will put your positive earning of $50 from Box 2a on Line 5b (given that it's not an IRA)

Pick a distribution code that allows "8" as the second code.

First code "2" works.

If you want to e-File this, you probably will need a Payer's TIN.

@AMS2022 

[fanfare]

First code "2" alone without a second code also works.

@AMS2022 

[AMS2022]

@guywong - Thanks for following up.

Between your feedback and my own reading/research, I think i am making progress.

Now one thing i am stuck on a little bit is on the information I need to populate in the 1099-R (2023 issue) that i self-create.  Specifically, i=I had mentioned in my original post that:

6. Excess amount was $2900.98 and earnings on that were $50.19 - total $2,951.17.  

Now 1099-R Box 1 is Gross Distribution.  So that would be $2,951.17.  But in the 1099-R Instructions, it says Box 2a is “earnings”.  Which per above would be $50.19.

Page 11, under section on IRA Excess Contributions, instructions say the following:

“• For a distribution of contributions plus earnings from an IRA before the due date of the return under section 408(d) (4), report the gross distribution in box 1, only the earnings in box 2a, and enter Code 8 or P, whichever is applicable, in box 7. Also, enter Code 1 or 4, if applicable.”

It says above that Box 2a is “only the earnings”.  So do I input $50.19 there or the full ‘$2,951.17?

I have been unable to find anything that provides clarity.

Per your earlier input, Box 7 code would be “P” (1099-R I generate would be a 2023, so that P refers to 2022 which is in fact the Filed Return I am Amending, so good there).

Any further input, please?

[fanfare]

please refer to my reply above for clarity

your allocable earnings are $50 after rounding.

as I mentioned, a second code "8" is extraneous.

@AMS2022 

[AMS2022]

@fanfare  - I have now received the excess contribution + earnings check.

From all my reading, I can now, before Oct. 15th, 2023, file an Amended Return for 2022.  For that, I need to add a new 1099-R relating to this distribution.  But as long as I do so before Oct. 15, it should add this entire distribution to my 2022 income as regular income and i will therefore have additional taxes due as well.

But that will require a 2023 1009-R (creation, by me) and P code to indicate it is a return of 2022 excess contributions.  

So my question on Box 1 vs. Box 2a still remains given the amounts.

This is consistent with @guywong has highlighted in his responses.

[fanfare]

" it should add this entire distribution to my 2022 income as regular income"

that's not right. you don't pay tax on your return of excess.

the taxable amount  is $50.

Use the 1099-R as I suggested and you will get the correct result.

@AMS2022 

[fanfare]

Box 1 is $2951.

@AMS2022 

[guywong]

@AMS2022 IMO, Box 1 of the 1099-R for the excess deferral should be $2,900.98 with a distribution code "P" and there should be a second 1099-R for the $50.19 earnings.  The reason for two 1099-R's is that the excess deferral is taxed in the year of contribution while the earnings are taxed in the year of distribution.

I reread your OP.  There are a couple of problems in your situation.  

First, the 2022 excess deferral was not distributed by April 15, 2023.  Secondly, the excess plus earnings came out of your wife's rollover IRA, the IRA trustee may not know or care whether the excess was an "excess deferral" or an "excess contribution".  As a result, the IRA trustee may treat that as an "excess contribution".  If so, they may simply lump everything together and issue just one 1099-R for $2,951.17 with a distribution code 8 in Box 7.  So it's imperative that you talk with IRA trustee on how they will issue the 1099-R before you do anything. 

Finally, I want to point out there is a difference between "Excess Deferral" and "Excess Contribution".  I believe you're situation qualifies as an "Excess Deferral".  I'm assuming your wife put in no more than the 401(k) limit of $20,500 (or $27,000 if she's age 50 or older), was an executive at the company where she worked and her 401(k) contribution was subject to some sort of "top heavy" rules. 

If the $2,900.98 were an "excess contribution", then that would be taxed in the year of distribution, in other words, it would be taxed in 2023 and no 2022 amended tax return would be required.

If your main purpose is to limit penalties and interests, you can always pre-pay an estimated amount equal to $2900.98 multiplied by your tax bracket at www.irs.gov.  But that's probably not worth the potential hassles.

Here another link for your reading:

https://www.mysolo401k.net/removing-excess-deferrals-when-contributing-to-multiple-retirement-plans/

[AMS2022]

@fanfare - This return of excess contribution came from a 401(k) account that upon retirement was rolled over into a Traditional IRA.  However, it appears the excess was generated in the 401(k) due to a mix of employee and employer contributions.  Nonetheless, the letter we received said it was my wife’s excess contribution of $2900.98 and $50.19 earnings for a total of $2,951.17 that was just removed.  The excess was in 2022.  The return just a couple of weeks ago.

It would seem that the entire amount has to be taxable - as are funds removed from 401(k) or IRA that are both tax sheltered until removal.

That is why the Box 1 and 2a are causing some confusion.  If I only enter the $50.19 in box 2a and that is all that is taxed, what about the original $2900.98 which hasn’t been taxed?

[fanfare]

If you want your entire distribution taxed,

enter the distribution in Box 1 and Box 2a.

do not check any 2b box.

Use distribution code 2.

@AMS2022