Reply To: 401K and rollover IRA both reporting same excess contribution in different years

Home Fairmark Forum Retirement Savings and Benefits 401K and rollover IRA both reporting same excess contribution in different years Reply To: 401K and rollover IRA both reporting same excess contribution in different years

#22888
Alan S.
Participant

1) The 401k excess is only taxable once. The corrective distribution from the IRA 1099R should only show the earnings (900) taxable, however because the excess TIRA contribution was made in 2020, those earnings will be taxable in 2020 as well. The 1099R from the IRA will be coded to indicate the earnings are taxable in 2020.

2) Some tax programs will require you to make up a dummy 1099R as if you had it now. You know what the earnings are (the amount distributed less 2500). You would show 3400 in box 1, 900 in 2a, Code P in box 7 (also code 1 if under 59.5). But if the dummy 1099R must be a 2020 1099R then use code 8 in box 7 since the dummy 1099R will be one year early. End result is that the 900 should be added to 2020 taxable income line 4b.

3) Remember, your two 1099R forms from the 401k replace the first one and should indicate “corrected”, so do not enter the first 1099R from the plan that was replaced to separate out the excess portion.

4)If you are using a program like Turbotax, they might offer guidance on how to enter the info. This situation is fairly common.