402g Refund and 1099R's

[wifrbr]

Hello,

 

If an employee goes over the 402g limit for the year and the correction is made in the current year,  what would the 1099r look like.  

For example.  John contributes $19500 for 2018.  We correct this in December 2018 but because of loses the refund is only $900(1000(amount over) - 100(loses)

When he gets his 1099r in Jan 2019 will it be an issue if it says $900.   When doing his taxes he will enter $19500 for his 401k contribution and enter $900 for the 1099r.  Will the IRS still he went over $100?

 

 

[Mr Bagwell]

From the 2018 1099-r Instructions...  excess contributions... losses　

However, taxpayers must include the total amount of the excess deferral (unadjusted for loss) in income in the year of deferral, and they may report a loss on the tax return for the year the corrective distribution is made.

Someone please correct if wrong...  I would issue the 2018 1099-r for $900.  But his tax preparer will include $1,000 as the overage, and will report a loss of $100, all in 2018.

[Lou S.]

Sounds right Bagwell.

[Kristina]

Losses are not reported on the Form 1099-R.  The tax return referenced in the instructions is the 1040.  In other words, he will report the full excess deferral as income.  Then in the course of completing his 1040, he will indicate there was a loss.  The documentation for the loss has to come from somewhere other than the 1099-R

[Mr Bagwell]

32 minutes ago, Kristina said:

The documentation for the loss has to come from somewhere other than the 1099-R

That's why I supply a letter detailing the above information for the participant to help/give the tax preparer.