Where do I enter the loss for last year's excess s...
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New Member

Where do I enter the loss for last year's excess salary deferral?

I had an excess salary deferral in 2018, which had a small loss ($7).

I reported the entire excess deferral in 2018 under "other income."

Now in 2019 I am trying to report the $7 loss in the same place as a negative number.

TurboTax now treats this as a mistake, with the error:
"Wages, Salaries & Tips Worksheet: TP other earned inc shouldn't be less than zero".  

Am I putting this in the wrong place?
8 Replies
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Expert Alumni

Where do I enter the loss for last year's excess salary deferral?

It depends whether the excess distribution was corrected.

 

See this explanation from the IRS: Consequences to a participant who makes excess deferrals to a 401(k) plan:

Unless timely distributed, excess deferrals are

(1) included in a participant’s taxable income for the year contributed, and

(2) taxed a second time when the deferrals are ultimately distributed from the plan. See IRC Sections 402(g)(1) and 402(g)(2) and Reg. Section 1.402(g)-1(e)(2).

A participant who fails to receive a distribution of the excess deferrals does not receive basis in his pre-tax deferral account equal to the amount of excess deferrals. See IRC Section 402(g)(6).

The amount of the excess deferral will not be taxed twice if a corrective distribution is made.

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New Member

Where do I enter the loss for last year's excess salary deferral?

I'm not sure that my initial question was understood. 

 

What I am asking about is the *capital loss* on the excess deferral.   In tax year 2018 I reported the full excess deferral amount, even though the distribution was a little smaller because of a capital loss.  I believe that I was supposed to record the capital loss as negative income somewhere in tax year 2019.

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Level 1

Where do I enter the loss for last year's excess salary deferral?

I am in the same situation.  I received a check in early April before filing my taxes for 2018.  The letter that came with it said  'you should report the pre-tax amount of your excess deferrals on line 7 of your individual tax return (form 1040) for 2018, and you should report the alllocable loss as a bracketed amount on the "other income" line of your form 1040 for 2019.'  I do not have to amend my 2018 return because I dealt with it when I filed in mid April. 

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Level 15

Where do I enter the loss for last year's excess salary deferral?

For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf

 

Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Include the loss as a negative amount on Schedule 1 (Form 1040), line 21, and identify it as “Loss on Excess Deferral Distribution.”

 

Enter as:
Miscellionious Income ->
Other reportable Income ->
Any Other Taxable Income (yes) ->
Description (enter "Loss on Excess Deferral Distribution" and amount as a negative number).

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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Level 1

Where do I enter the loss for last year's excess salary deferral?

I was able to enter a negative number in line 14 of the Wages, Salaries, and Tips worksheet.

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Expert Alumni

Where do I enter the loss for last year's excess salary deferral?

Here is how to enter the excess salary deferral in TurboTax so that the amount will appear on Form 1040 Schedule 1 line 8

 

Under income:

  1. Select 'Less Common Income'
  2. Then select  'Miscellaneous Income'
  3. Then select 'Other reportable income'
  4. The next screen will ask if you had 'Any Other Taxable Income?'  Select Yes.
  5. The next screens will ask for a description and the amount.
  6. Enter the amount as a negative number, and the amount on line 8 of Schedule 1

@JDIETZ61

 

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Returning Member

Where do I enter the loss for last year's excess salary deferral?

I tried doing as you suggested and TurboTax a) will not accept a negative number and b) Line 21 on the 1040 refers to a "refund".

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Level 15

Where do I enter the loss for last year's excess salary deferral?


@B_T007 wrote:

I tried doing as you suggested and TurboTax a) will not accept a negative number and b) Line 21 on the 1040 refers to a "refund".


Note that the topic of this thread is a *2018* tax return.  It was line 21 in 2018, the forms and line numbers for 2019 are different.    For 2019 that put it on the 1040 Schedule 1 line 8 under "Other income".

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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