Prior year Roth 401k over contribution through W2

[skyworks]

My client got a notice from IRS to pay more tax owed for missing a W2 for 2020. IRS notice did not request amend 2020 return.

Now I recalculated by add this missed W2 come up a much less tax liability, 

Was wondering if we should file an amend return?

Also another issue identified:

Combined the two W2's, total Roth 401k over contributed by $900 for 2020.

What is the solution to the over contribution Roth 401k for 2020?

401k Admin (Fidelity) told them it is passed the dateline to withdrew 2020 excess contribution>

my question, is it still ok to do early withdrew for the excess contribution?

Client concerns is that 1099 R will not indicate this is withdrew from 2020 excess contribution

[qbteachmt]

"401k Admin (Fidelity) told them it is passed the dateline to withdrew 2020 excess contribution>"

They have missed the deadline for it to be moot. The deadline for the corrective distribution to treat the offset to the contribution as if it never happened, is what has passed. As long as they still work for that employer, they should file for a corrective distribution. But now, because they missed the deadline, you have to deal with excess contribution excise tax and tax on earnings. Roth 401(k) contributions are not pre-tax, so you would not need to add that back as taxable income, but I would confirm it is part of the W2 income:

https://ttlc.intuit.com/community/retirement/discussion/roth-401k-excess-contribution/00/1260741

This is similar to your HSA issue. Take it year by year.

Start here:

https://www.investopedia.com/what-to-do-if-you-contribute-too-much-to-your-roth-ira-4770686

https://www.investopedia.com/ask/answers/158.asp

[qbteachmt]

Oh: "Client concerns is that 1099 R will not indicate this is withdrew from 2020 excess contribution"

That's right. The Form 1099-R will be for 2022. You will have to report all of this on the 2020, 2021 and 2022 tax filings, as appropriate to what happened:

2020 excess contribution excise tax + earnings income tax

2021 still has the excess contribution and new earnings

2022 has the corrective distribution, so there are only the earnings to report for 2022