tax and 403b question

[wucool33]

Hey guys,

I know we have a couple of tax experts here, so I thought I'd ask a simple question. As I'm looking over my w2s, I realized that I over contributed to my 403b account due to job change and miscalculation. If I ask for the excess to be returned, do I need to put it on the tax return this year or just wait until next year when I get the 1099R? If I do need to report it this year, how do I go about doing it on turbotax? lol

Thanks!!!

---

Members don't see this ad.

 

[pezdispenser]

You need to contact the plan and have them return the excess deferral and the earnings from it before April 15. Your employer will then have to amend your 2019 W-2 to include the excess deferral so that it can be taxed on your 2019 tax return, so you will have to wait for this before you file. The earnings will be taxable on your 2020 tax return that you file next year, and yes, they will issue you a 2020 1099-R.

 

[wucool33]

You need to contact the plan and have them return the excess deferral and the earnings from it before April 15. Your employer will then have to amend your 2019 W-2 to include the excess deferral so that it can be taxed on your 2019 tax return, so you will have to wait for this before you file. The earnings will be taxable on your 2020 tax return that you file next year, and yes, they will issue you a 2020 1099-R.

Thanks! I just contacted fidelity for the return. Do I have to contact HR/payroll for a new w2 or will it be done automatically?

 

[pezdispenser]

I would contact HR to make sure they amend your W2.

 

[mentos]

Thanks! I just contacted fidelity for the return. Do I have to contact HR/payroll for a new w2 or will it be done automatically?

LoL HR never does anything unless you ask them to multiple times.

 

[wucool33]

I would contact HR to make sure they amend your W2.

I just contacted them and got this reply. Does this mean I don’t have to worry about it until 2021 (when I file the 2020 return)? Would I be penalized for the over contribution this year if I just leave my tax as is? Thanks

“The earnings must be reported on tax returns for the year in which the refund is paid. For example, if a participant receives a refund of 2019 excess contributions in 2019, all amounts should be reported on tax returns for 2019. If the participant receives the refund in 2020, however, the excess contributions should be reported on 2019 tax returns and any earnings on tax returns for 2020."

 

[pezdispenser]

I just contacted them and got this reply. Does this mean I don’t have to worry about it until 2021 (when I file the 2020 return)? Would I be penalized for the over contribution this year if I just leave my tax as is? Thanks

“The earnings must be reported on tax returns for the year in which the refund is paid. For example, if a participant receives a refund of 2019 excess contributions in 2019, all amounts should be reported on tax returns for 2019. If the participant receives the refund in 2020, however, the excess contributions should be reported on 2019 tax returns and any earnings on tax returns for 2020."

What they said is correct, but I think you didn't realize that there are two parts:
1. The excess contribution which came from your 2019 salary, so when it is returned they'll have to amend your 2019 W2 so that you can include it as taxable income on your 2019 tax return.
2. The earnings from the excess contributions while they were in your 403b. Since you are getting the refund now in 2020, the earnings will be taxed on your 2020 tax return.

If you don't do anything, I'm not really sure what will happen. The IRS may or may not pick up on the fact that you made excess contributions because you have multiple employers. If they do, then they'll force your employer to refund it and you'll have to go back and amend everything.

If you get the excess refunded but your employer doesn't amend your W2, then your employer is going to have a discrepancy in their accounting, which could very well slip through the cracks. But on your end, your tax return will match the W2 that the IRS received so the IRS shouldn't come after you. But if you file your tax return with the uncorrected W2 and your employer later goes back and amends it, then the IRS will now see the discrepancy and make you amend your tax return. This is why I recommend that you wait for your employer to amend your 2019 W2 and follow up with them if necessary.

 

[wucool33]

What they said is correct, but I think you didn't realize that there are two parts:
1. The excess contribution which came from your 2019 salary, so when it is returned they'll have to amend your 2019 W2 so that you can include it as taxable income on your 2019 tax return.
2. The earnings from the excess contributions while they were in your 403b. Since you are getting the refund now in 2020, the earnings will be taxed on your 2020 tax return.

If you don't do anything, I'm not really sure what will happen. The IRS may or may not pick up on the fact that you made excess contributions because you have multiple employers. If they do, then they'll force your employer to refund it and you'll have to go back and amend everything.

If you get the excess refunded but your employer doesn't amend your W2, then your employer is going to have a discrepancy in their accounting, which could very well slip through the cracks. But on your end, your tax return will match the W2 that the IRS received so the IRS shouldn't come after you. But if you file your tax return with the uncorrected W2 and your employer later goes back and amends it, then the IRS will now see the discrepancy and make you amend your tax return. This is why I recommend that you wait for your employer to amend your 2019 W2 and follow up with them if necessary.

Thank you! you explained this very well! I got it now. I just hope I can make my employer understand lol they kept saying they will not amend my w2.