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

#26461
deedee8712
Participant

Alan, thank you very much for your prompt and detailed response. Sorry it took me so long to reply. Because I know of your consistently being right in this forum, I took your comments very seriously even though it contradicted the Form 1099-R instructions and verbal comments from (rollover IRA provider) Vanguard Retirement team personnel and another company-provided 401K advisor. It also was not what I remembered when I had a similar excess 401K contribution (without earnings) twelve years ago in 2009.

I dug into my paper boxes and found my 2009 tax forms and as you suggested the amount of excess contribution on 2010 Form 1099-R had code 1P in Box 7. So you were right and everyone else was wrong about what the rollover IRA provider would report in 2022 (code P in Box 7). Then I wrote an email to the Vanguard retirement team and asked about the specific amounts and codes and check marks in each box that I should expect for my 2022 Form 1099-R. This time I got the correct answer. Alas I needed to know the right answer to know what question to ask.

I started to enter a dummy 1099R into H&R Block desktop software but it would not add a comment and I did not like that approach. Instead under the other income category I chose “2020 IRA contribution returned to you in 2021” which prompted me to “enter amounts for the returned IRA contribution in 2021” and then prompted me for “the IRS requires a statement explaining the withdrawal” for a four line statement. I explained the full distribution to a rollover IRA and the failed 401K ADP/ACP plan and the excess contribution and the earnings. The earnings value appears on line 4b as you suggested and the explanation appears on the last page of my return.

I do not understand why the earnings on the excess contribution, eight months of which were in 2020 and four months of which were in 2021, are all taxed in 2020, but I’m not in a position to question it.