401 excess contribution withdrawn by the tax deadline

[ptax255]

Hi,

Client withdraw excess contribution to pre-tax 401K by tax deadline. No tax forms for it yet. How can I report this in Proseries?

[qbteachmt]

The corrective distribution would have included the excess contribution and the earnings attributed to that amount. If the contributions were made pre-tax, the employer must issue a corrected W-2 for that tax year to show the excess deferral amount as taxable wages (in Box 12). This is June, so that should have already happened. The earnings are added to the taxable income for the year the excess amount is distributed, but that 1099-R won’t come out until after the end of this year, coded as applicable to the previous tax year. You can use the 1099-R input as if you have one in hand.

[ptax255]

I have no corrected W-2 or a 1099R. Client said he worked with the employer to withdraw the excess but they did not give him a corrected W-2. So what's the best way to enter it without one?

[qbteachmt]

The 1099-R is for the year of removal, which is 2023. That won't arrive until Jan 2024.

The employer is responsible for a corrected W2. They, their Payroll processor, needs to provide it. It isn't a courtesy. It's a requirement.

[sjrcpa]

Depends on why it was an excess deferral if there will be a W-2c.

If it's excess because employer flunked the ADP test - no W-2c.

If it's excess because employee had 2 employers and exceeded the limit - no W-2c.

OP - If the second item is the reason, the excess deferral gets reported as wages in 2022. Some software does this automatically. Don't know about ProSeries.

[Accountant-Man]

In 2023, Form 1099-R will have a distribution code box 8, Return of contribution taxable in 2023, UNLESS

it is taxable in the prior year(2022) for the excess401k contribution. "Return of contribution taxable in 2022" received in 2023 on Form 1099-R 2023, will show code P. Then you have to amend 2022.

It stinks that the 2023 Form 1099-R reports 2022 income. 

[qbteachmt]

"Then you have to amend 2022."

Oh, I assumed that is the tax year being worked on right now. That's why I included that you can proceed as if you have those forms. 2022 is the taxable wages for a pretax excess contribution and 2023 is the taxable earnings.