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Old 03-27-2019, 07:10 AM
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Join Date: Mar 2016
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Excess 401(k) Contribution

I could use some help in reporting the return of my excess 401(k) contribution. TT is not wonderful regarding this. I made an excess contribution of $6587. I notified my company. As a result I received a Corrected W-2c and a return of funds of $5692, which indicated to me that my contribution suffered a loss of $895.I used the W-2c and edited my entries in the original W-2 and to the question of "uncommon situations", answered "Corrected W-2." As a result of this, my tax refund of $1598 dropped to $17. OK so far.

Then, according to the examples and help windows in TT, I went to Wages and Income, Retirement Plans and Social Security, IRA, 401 (k)Pension Plan Withdrawals (1099-R). Under Your 1099-R, answered "Yes" to "Do You Have Any of These Types of Income", and answered "I'll type it in myself." Under "Tell us which 1099-R you have", answered "Form 1099-R, withholding of money....." and then got to the "Enter Your 1099-R" screen. I entered the excess deferral in boxes 1 and 2a and used code P in box 7. TT contradicts itself here. Example 3 says to enter the "net amount received" in the boxes but TT asks for the "gross distribution." Not knowing what to answer, I entred the full amount of my excess deferral ($6587.) I advanced a few screens to "Where Is This Distribution From" and answereds "None of the Above" and entered "2019" for the year. I'm pretty sure this was not entered correctly due to the failure of TT to fully explain the dlifferences in the "deferral", the "gross distribution" and the "net distribution." As a result of these actions my $17 Refund changed to $2064 Due!!!

Then, as per Example 3, I went to Wages and Income, Less Common Income, Miscellaneous Income, Other Income Not Already Reported on a Form W-2 or Form 1099. Answered "Yes" to "Did You Receive Any Other Wages", advanced a few screens to "Any Other Earned Income" and answered "Yes" to "Did You Earn Any Other Wages?" Under "Enter Source of Other Earned Income" I answered "other" and under "Any Other Earned Income, andswred "2018 Excess Salary Deferral" and the amount (-)$895, which is my excess deferral minus the funds returned. Now my taxes due dropped a bit to $1778.

So I know something has been entered incorrectly because I went from a $1598 refund to owing $1778, a difference of $3376, which means my excess deferral of $6587 was taxed at 51% which I know is not my bracket. It seems that I'm setting taxed twice. I think it has to do with changing my original W-2 to reflect the changes in the Corrected W-2c AND in the 1099-R screens. Is it because once I edited my W-2, in effect I no longer had an excess salary deferral and all I should have done is entered the $895 net loss in my 1099-R? If so, what year was that loss incurred, 2018 or 2019? Probably 2019, right? Can anyone guide me as to the proper way to do this? I thank you in advance for just spending the time to read this and of course, if you take the time to respond. Thanks again, David



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Old 03-27-2019, 09:10 AM
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Join Date: Oct 2010
Posts: 5,227
sorry, i am not familiar with TT, you need to contact TT vendor for tech help in detail



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Old 03-28-2019, 06:34 AM
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Join Date: Mar 2016
Posts: 7
To Wnhough-Don't you understand the gist of what I am asking?



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Old 04-05-2019, 06:08 PM
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Join Date: Oct 2010
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Quote:
Originally Posted by Wnhough View Post
sorry, i am not familiar with TT, you need to contact TT vendor for tech help in detail
........
-just for ure, u my o thru the TT processes over againas you can see, you need to
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. Also youneed to include the loss as a negative amount on Form 1040, line 21 and identify it as ?Loss on Excess Deferral Distribution.
Just for a reference, the excess/ overcontributed amt should be returned to you by April 15 , I mean, say, for example, if the excess deferral --occurred in, say, 2018, it should be corrected that is, removed from the account by April 15 of 2019. This sum should include earnings accrued on the excess amount while it was in your account. And ofcourse, you are required to add the earnings to your taxable income for the year the excess amount is distributed from your 401(k). In addition, if the excess amount was deferred on a pre-tax basis, your employer must amend your W-2 Form to show the returned amount as wages. Also, aslongas the excess contribution is returned to you, then, even any earnings generated and included in the amount returned to you should be added to your taxable income on your tax return for that year. If the excess contribution is returned to you 2018, for example, any earnings included in the amount returned to you should be added to your taxable income on the tax return that you file in 2019.hoewver, unless the excess amount is returned to you by April 15, you could pay taxes on the amount twice in the year the excess occurred and in the year it is returned to you??
.



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