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The auditor is insisting we report the corrective distributions (for the 2014 plan year, corrected on 3/1/2015) on the Schedule H in the same manner they are treating these distributions in their financial statement. Specifically, the auditor wants us to - 1. Report these corrective distributions as a payable at 12/31/14 for excess contributions paid in the following year. We are to list them on line 1j(b), Other liabilities. 2. Reduce the Participant contributions reported on line 2a(1)(B) by the amount of these corrective distributions because their best practice is to reduce employee contributions because these were not eligible contributions. The audior says these contributions are required to be remitted back to participants and therefore were not actual contributions in 2014. 3. Not report the corrective distributions on line 2f, on either the 2014 or 2015 Schedule H, because the participant contributions are being reduced by this amount. The auditor will add a footnote to the financial statement describing this activity. I know the Generally Accepted Accounting Principles (GAAP) the auditor uses for the financial statement wants the corrective distributions handled this way, but I never heard of the Schedule H being completed in this manner. Has anyone come across this situation this year? If you have, how did you handle it with the auditor and the client?