How to report loss on refund from 401K After Tax excess contribution

Forum|Forum|2 years ago
January 29, 2024
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First time I got a return of excess contribution from 401K.

In 2022, I made 401K after tax contribution with immediate Roth in-plan conversion.

Fidelity informed me in early May 2023 that there was a return of excess contribution from my 401k contribution in 2022.

In mid-May 2023 Fidelity refunded the excess contribution (net the loss) and send documentation on the loss amount.

I also got the 2023 1099-R from Fidelity this month (January 2024), with code E.

I figured out how to report the refund of excess in Turbo tax.

How do I report the loss in Turbo Tax on 2024 tax return? Is it a short term capital loss on schedule D? Or is it an offset of income?

I would like to hear from folks who had excess and a loss on what you did to report the loss.

Thank you!

Best answer by dmertz

See page 11 of IRS Pub 525 where it says:

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 8z, and identify it as “Loss on Excess Deferral Distribution.”

https://www.irs.gov/pub/irs-pdf/p525.pdf