Steps to fix 401k excess contribution (2019) rolled over to Trad IRA (2020)

[Marty20]

I just found out through Turbotax that I contributed an excess of $547 into my 401k in 2019. I have been trying to solve the problem in the last 24 hours with the brokerage firm and employers over the phone but they seemed confused, unhelpful and trying to point fingers at each other. What’s the best way to proceed and fix this problem prior to the July 15 Tax Day? I followed the steps mentioned in the following blog where I reported the $547 amount as an income: "2019 Excess 401K Deferrals" https://ttlc.intuit.com/community/state-taxes/discussion/steps-to-take-to-remove-an-excess-salary-de....

Is this the best solution? Should the brokerage firm send me a check for the excessive contribution amount ($547) prior to July 15 per Turbotax (see attached screenshot) to close the loop and then send me 1099-R for the principal and another one for the earnings? Can they take the money from my IRA account since I no longer have a 401k account? Thank you!

Background info: I separated from company A on December 31, 2018. They payed me for the last week of December in early January (pay period 12/22/18 to 01/04/2019). I’m not sure why they included a 2019 401k contribution of $547. I already maxed out my 2018 401k contribution. I rolled over company A 401k funds to a traditional IRA plan sometimes in 2019 with the same brokerage firm.

In February 2019, I started a new job with company B. I contributed to a new 401k plan and maxed out my contribution. I also separated from company B and rolled over my 401k to an IRA plan last month.

[VictoriaD75]

Whether or not your plan sponsor meets the 7/15/20 deadline, you need to include the excess 401(k) contribution to your wages on your Form 1040, using the instructions below.  The initial contribution was pre-tax and reduced income, therefore, the excess contribution must be added back to your income.

If the plan sponsor is unable to make the distribution by 7/15/20, you will end up paying taxes on the amount twice...first on your 2019 Tax Return and then again when you withdraw the money during retirement.  

You should not make any changes to your W2, it needs to be input exactly as it appears so that the IRS can match the information to your return.

You should report the excess contributions on Line 1 of your 2019 Tax Return by following these steps:

1. Login to your TurboTax Online Account
2. Click "Take Me to My Return"
3. Click "Federal" from the left side of your screen
4. Scroll down to "Less Common Income" and click "Show More"
5. Select "Miscellaneous Income" and click Start or Update
6. Select "Other income not already reported on a Form W-2 or Form 1099" and click on Start
7. Answer the Question "Did you receive any other wages?  Yes
8. Click "Continue" through the questions until you get to "Any Other Earned Income"
9. Answer "Yes" to "Did you earn any other wages?
10. Indicate "Other" as Source of Other Earned Income and click Continue
11. For the description enter "2019 Excess 401K Deferrals" and click on Done

If your Plan Sponsor ends up making the distribution by 7/15/20, you will receive a 2020 Form 1099-R in 2021 showing the refund with a code "P" in box 7 which you can ignore if the excess deferral is reported as suggested above.  However, the earnings will be reported on a separate 2020 Form 1099-R with a Code "8" in Box 7 that should be reported on your 2020 tax return.