I contributed over the maximum $19500 in 2021 due to changing jobs.
To correct this,
1) 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.
2) I believe that I will get a 2022 Form 1099-R to report the overcontribution 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:
1) I’m getting the overcontribution 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 overcontribution refund in 2022 it’s considered 2021 income, correct?
2) The 2022 1099-R will report income (the overcontribution) as 2022 income, right? Can the 2022 1099-R simply be ignored?
This topic was modified 5 months, 1 week ago by Kaye Thomas. Reason: Formatting removed
Your immediate issue is that the refund has to occur by April 19. Otherwise, there is no way to avoid the draconian penalty of double taxation on the amount of your overcontribution.
Next issue is how to file for 2021. You do not need a corrected W-2. However, this is treated as additional wages, not “other income.” When you add this amount to your wages, it may appear to create a potential problem in that you are reporting an amount that does not match what is on your W-2 forms. But this is not a problem: IRS gets concerned when the amount reported as wages is less than shown on your Forms W-2, but not when it is more.
Tax reporting for retirement plan distributions includes a box for the amount distributed and another for the amount taxable. I believe for 2022 you’ll report the corrective distribution as amount distributed and zero as amount taxable. This assumes you receive the corrective distribution by April 19. It also assumes I’m remembering this correctly off the top of my head, so you should check before relying on these comments.
[Edited to correct my mistake in forgetting that this year the deadline is April 19.]
This reply was modified 5 months, 1 week ago by Kaye Thomas.
Viewing 2 posts - 1 through 2 (of 2 total)
The forum ‘Retirement Savings and Benefits’ is closed to new topics and replies.