Question

How to report excess after-tax 401k contribution that was rolled over to Roth IRA before requested distribution?

Forum|Forum|5 years ago
July 3, 2020
1 reply
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I have a 401k plan that allows both traditional (pre-tax or Roth) contributions as well as after-tax contributions. I maxed out the total contribution limit in 2019 (traditional and after-tax).

I changed employers in 2020. At the end of April, I requested the after-tax contributions be rolled over to a Roth IRA account (pre-tax went elsewhere). The process took awhile. During this time, my previous employer contributed an additional match to my 401k account as part of a true-up for 2019 contributions. I did not notice this. ~~The additional match ended up rollover over to my Roth IRA.~~

The 401k company sent me a letter in June notifying me that they tried to refund ~~the~~ $100 (after-tax basis $110) because it put me over the total 2019 401k contribution limit. However, by this time the money had rolled over to the Roth IRA already. They indicated they would amend my 2020 1099-R with:

$100 gross amount
$110 after-tax basis
distribution code: E
description: 415(c)(1)(a)

I called the Roth IRA company and asked for this "excess contribution" to be returned to me. They sent me a check for $100 + $5 gains.

I assume I have to amend my 2019 tax return. How do I do this in 2019 Turbotax?

Thank you!

Edit: crossed out incorrect information.

TurboTax Home & Biz Windows

macuser_22

Employee

The employer match is always before tax money and could not be rolled to a Roth IRA. In any event you cannot "fix" an excess deferral with an IRA distribution, you simply will pay the tax again when the money is distributed form the Traditional IRA and the tax on the 1099-R with the code E. That double tax is the penalty for not timely removing it.

The code E on a 2020 1099-R will be reported next year on your 2020 tax return.

**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.**

B

bananacoffeecakeAuthor

It seems to me that they are considering my after tax contributions to be the excess because they are reporting an after tax basis. In addition, the pretax monies were rolled into a 401k in the same 401k company... just a different employer.

macuser_22

Employee

You said: During this time, my previous employer contributed an additional match to my 401k account as part of a true-up for 2019 contributions.

Since employer match can only be before that money then that could not go to a Roth IRA, but as I said, that is immaterial because once the 401(k) is closed then it it not possible to return any excess from it, hence the Code E 1099-R rather than a normal return of excess with a code P or 8.

There was no need to make any IRA distribution.

User @dmertz do you concur or have a different opinion?

**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.**