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March 12, 2020
Question

Excess 401K Deferrel due to plan not being a safe harbor

  • March 12, 2020
  • 1 reply
  • 0 views

I just received a check from my 401K plan for Excess deferrals because I am a high earner in my company.  I have already filed my tax return and received my refund.  Do I need to Amend my return and will I be charged a 10% Penalty for a distribution since i'm not 59? 

    1 reply

    March 12, 2020

    You will not be charged a penalty.  

     

    Since you've already filed your tax return, you will need to amend it.  Page 10 of IRS Pub 525 under Excess deferrals (the IRS term for 401K contribution is deferral) tells us to include the excess deferrals as income on line 7 of Form 1040 if the money was returned after the end of the tax year but by April 15th of the following tax year.  You need to report only the excess contribution, not any money generated by the investment of the excess contribution.  What you earned will be covered by a 1099R for the following tax year and will be entered then as a normal 1099R.

    Below is how to do this in TurboTax Online. 

    • Click on Federal
    • Click on Income & Expenses
    • Scroll down to "Less Common Income"
    • Select Miscellaneous Income and click Start or Update
    • Select "Other income not already reported on a Form W-2 or Form 1099" and click on Start
    • Answer the Question "Did you receive any other wagesYes
    • Click through the questions till you get to Any Other Earned Income
    • Answer Yes to "Did you earn any other wages?
    • Indicate "Other" as Source of Other Earned Income and click Continue
    • For the description enter "2019 Excess 401K Deferrals" and click on Done
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