I contributed over the maximum $19500 in 2021 due to changing jobs. I will be receiving a refund of the excess contribution shortly. To correct this:I believe that I have to add the excess contribution to my 2021 income either by getting a corrected W-2 or reporting it as 'other income which was not reported on a W-2'.I believe that I will get a 2022 Form 1099-R to report the excess contribution refunded to me, but since I already added it to my 2021 income, it will not be taxable for 2022.If my beliefs are correct, then two things confuse me:I'm getting the excess contribution refunded to me in 2022 but paying the tax, either by corrected W-2 or 'Other Income', on my 2021 tax return. So even though I receive the excess contribution refund in 2022, it's considered 2021 income, correct? The 2022 1099-R will report income (the excess contribution) as 2022 income, right? Can the 2022 1099-R simply be ignored?

Question

I accidentally contributed over the 2021 maximum to my 401K due to having two employers

Forum|Forum|4 years ago
April 13, 2022
1 reply
0 views

I contributed over the maximum $19500 in 2021 due to changing jobs. I will be receiving a refund of the excess contribution shortly.

To correct this:

I believe that I have to add the excess contribution to my 2021 income either by getting a corrected W-2 or reporting it as 'other income which was not reported on a W-2'.
I believe that I will get a 2022 Form 1099-R to report the excess contribution refunded to me, but since I already added it to my 2021 income, it will not be taxable for 2022.

If my beliefs are correct, then two things confuse me:

I'm getting the excess contribution refunded to me in 2022 but paying the tax, either by corrected W-2 or 'Other Income', on my 2021 tax return. So even though I receive the excess contribution refund in 2022, it's considered 2021 income, correct?
The 2022 1099-R will report income (the excess contribution) as 2022 income, right? Can the 2022 1099-R simply be ignored?

M

Mike9241

Excess deferrals withdrawn by April 18,2022 are taxable in the calendar year deferred, with earnings taxable in the year when they are distributed, and there’s no 10% early-distribution penalty.

Failing to Make the Correction – The results of not correcting an excess 401(k) contribution before April 15 of the subsequent year are as follows:

1. The excess is taxable in the year of the excess contribution (but not subject to the 10% premature distribution penalty if the taxpayer is under age 59½).

2. Whenever the excess is withdrawn, it becomes taxable again.

in 2022 you'll receive a 1099-R for 2021 will have code P which tells the IRS the amount (excluding earnings ) was taxable in 2021

S

starfishtAuthor

Thanks Mike. I have now received a check for my 2021 excess deferral. Is that what you mean by a "correction"?

I know that I now have to report that amount as income, as you say, on my 2021 tax return. If I can't get an amended W-2, my question is how do I report it? In Turbotax as 'Other income not already reported on a Form W-2 or Form 1099' or simply add it to 1040 box 1 wages?

As you say, I will receive a 1099-R in 2022 reporting the amount (the excess deferral). Can I just ignore the 1099-R because I already paid the tax on that amount on the 2021 return?

D

DanaB27

Yes, you made the correction by withdrawing the excess before April 15th, therefore you won't be double-taxed as Mike9241 mentioned above.

Please follow the steps below:

Login to your TurboTax Account
Click "Federal" from the left side of your screen
Scroll down to "Less Common Income" and click "Show More"
Scroll down to "Miscellaneous Income, 1099-A, 1099-C" and click "Start"
Select "Other income not already reported on a Form W-2 or Form 1099" and click "Start"
On the "Did you receive any other wages?" screen answer "Yes" and click "Continue"
Continue until you get to the "Any other earned income" screen, answer "Yes" and click "Continue"
On the "Enter Source of Other Earned income" screen select "Other" and click "Continue"
On the "Any Other Earned Income" screen enter "2021 Excess 401(k) Deferrals" for the description, enter the amount and click "Done".

If you receive the distribution of the excess deferral and earnings then please note for the Tax Year 2022 tax filing due April 15, 2023:

2022 Forms 1099-R will be issued reporting the excess.

Form 1099-R with code P in box 7 can be ignored if you reported the excess as described above in 2021.
However, the earnings on Form 1099-R with Code 8 in box 7 should be reported in 2022.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"