Level 3

Excess 401k Contributions

Forum|Forum|2 years ago
April 5, 2024
1 reply
8 views

Could someone help, please:

I have two separate clients who deferred in excess of the $22,500 for TY 2023 on their 401k.

If their request to withdraw the excess was sent "on time" before April 15th this year (and were told that they will receive a 1099-R for 2024 next year), how do I enter the deferral amount being returned to the client on their TY 2023 return?

I have read online about what people do, from entering it as "other income" to creating a fake 1099-R with code P. All of that is confusing and may not be viable. I would like to know how my fellow EAs solve this issue to state the client (in their TY 2003 return) is withdrawing the excess by April 15, 2024.

Also, how does it compare withdrawing excess from a pre-tax versus an after-tax 401k account? One of my clients is withdrawing her excess from her 401k Roth. More specifically, how do I enter it in the software? I have ProSeries professional.

Very appreciative, RC

qbteachmt

Level 15

"If their request to withdraw the excess was sent "on time" before April 15th this year"

For future reference, they were supposed to have made this request by March 1, to get a corrected W2.

"Also, how does it compare withdrawing excess from a pre-tax versus an after-tax 401k account? One of my clients is withdrawing her excess from her 401k Roth."

In both cases, any earnings are taxable, are distributed in 2024, and thus will be reported for 2024 by entering the 1099-R. There should be two issued: one for the earnings and one for the corrective distribution. The earnings will not be code P; they are taxable for the year distributed.

For after-tax (Roth), you enter basis.

Expand this for the codes for how to enter 2023:

https://accountants.intuit.com/support/en-us/help-article/form-1099-r/entering-form-1099-r-proseries/L0otcKvVi_US_en_US?uid=lumu92bx

Expand this topic for Making Excess 401(k) Taxable:

https://accountants.intuit.com/support/en-us/help-article/other-articles/entering-keogh-sep-simple-p...

Don't yell at us; we're volunteers

T

TaxSageAuthor

Level 3

Thank you, qbteachmt,

I appreciate all the information shared. Glad I know that it's possible to get a corrected W2 by acting on time.

Since the 1099 R forms will be issued next year, what do I need to enter, and where in the return, in this year's taxes, to inform the IRS that the taxpayer has withdrawn the excess contributions?

~RC

D

dpatterson1171

Level 5

Rosario,

Thank you for asking this question. I have the same scenario this year from an employee whose employer changed hands and he had excess Roth IRA contributions of $5,150.22 while working for the company who bought it. The 2nd company is going to issue 2 1099R's for next year but I also am struggling on how to report this on his 2023 return. Hopefully they will get back to you so we both know. Putting this out there to highlight the issue to a greater level for replies. They also told me that they do not think a revised w-2 will be issued.

Thanks

Dave

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