Switched jobs in late 2024 and overcontributed to 401(k) due to a reporting error. W-2s show excess deferrals, but no 1099-R was issued. Deadline pass for excess remove.

[salvadorvillalon54]

In October 2024, I quit my job and started a new job in November 2024. During that time I set up new retirement account with them. The Guideline platform asked how much have I already contributed in 2024. I put the wrong total. That is why I was able to contribute more than I should. I think that is why I did not received 1099-R from Guideline since they did not think I exceed deferrals. So no when adding all the contributions listed on my W-2 I get a number above the limit. Guideline platforms says I exceed the deadline to remove excess contributions.

[MaryK4]

Did you request a return of the excess from the retirement fund?  You must do that first.  

This link will have the steps to report it, but if you did not request return, you NEED to do that first.

What if I have a 401(k) excess deferral? - TurboTax Support

[salvadorvillalon54]

From my understanding

The Guideline 401k Plan Administrator have the following rules in this article What happens if I overcontribute to my 401(k) account?

There it mentions 
"Unlike an overage in a single plan, there is a deadline to both report the outside contribution and request a refund. You must report the outside contribution by March 1 of the following year and the refund must be completed by your tax return due date." 

I also call them with my situation and they said that I was passed the deadline. 

From my understanding, I think I am past that deadline to request a refund. Or am I missing misunderstanding something?

Thank you for your help!

[MaryK4]

You will have to report the excess:

1. Under Less Common Income and click "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
2. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
3. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
4. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
5. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
6. On the "Any Other Earned Income" screen enter "2024 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".
 

Unfortunately, you will have to pay tax on the same amount when it is distributed.

Excess not distributed.

If you don't take out the excess amount, you can't include it in the cost of the contract even though you included it in your income. Therefore, you're taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution (unless the excess deferral was a designated Roth contribution).  Excess not distributed.

@salvadorvillalon54 

[salvadorvillalon54]

How come I will be paying taxes twice? 

With the steps you mentioned above won't I pay taxes on it since I am declaring it?

Also what will happen if I add them as part of my wages (adding the excess deferrals to the total W-2 wages) so that I pay taxes on them. Is that possible? 

[DanaB27]

You will pay taxes twice since you didn't withdraw the excess by April 15th. Once with the steps MaryK4 gave above, which puts the excess on line 1h of Form 1040. And then again when you distribute the excess amount at a later time as a regular distribution. There is no way around getting taxed twice since you missed the deadline.

[salvadorvillalon54]

Is it possible to contact my plan administrator and tell them that the excess amount be flagged and tracked as after-tax contribution? So that it helps ensure that the contribution is not taxed again in the future?

[salvadorvillalon54]

Okay so I will do the steps you all mentioned. If I document this properly so that when I retire and take out the money I can show proof that I already paid taxes on it. Would that work? Is that possible?

[SusanY1]

No, that amount cannot be flagged as an after-tax contribution.  The penalty is that it will be taxed twice.  There isn't a workaround for that as it's by design.  

[salvadorvillalon54]

1. Under Less Common Income and click "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
2. Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
3. On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
4. Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
5. On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
6. On the "Any Other Earned Income" screen enter "2024 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".


By following the steps above, where will the excess deferral  on a 1040 form show up? Is it on line 10 of the 1040 or line 1h?

Also, will the total excess deferrals show up in in a 1040 Form Schedule 1? Or where will it show? 

Thank you all for you help.

[DanaB27]

It will show up on line 1h of Form 1040. 

@salvadorvillalon54