Excess Contribition to 401K in 2018

Submitted by Andrew Zahn on Wed, 2019-03-27 13:41

My daughter changed jobs in 2018 and unfortunately contributed $19,234 in total to the 401K plans at the two companies. She didn’t recognize she had a $734 excess contribution until Feb 2019. She alerted her current company’s Plan administrator in Feb. and in early March 2019 received a $734 check and a statement from VOYA confirming the Excess Elective Deferral 402(g). We use Turbo Tax to do preliminary taxes, It automatically recognizes the excess contribution and adds the excess to her FED and New Jersey (resident state) wages. I have the following questions and really appreciate any advice you can give me:

Is it correct to recognize the $734 excess contribution in 2018 and add $734 to wages (even w/o an adjusted W-2) ?
(Turbo Tax adds the $734 to W-2 wages as a separate line item on its “Wages, Salaries, and Tips worksheet”)

Should my daughter request a revised W-2 for 2018, which reverses the excess and increases her wages?
(Her company has told her she doesn’t need a revised W-2)

Should she supplement the return(s) with letters of explanation to the IRS and New Jersey division of Taxation?

I understand that she will receive a 1099 for the 2019 showing any earnings on the excess contribution. Is that correct?

Thanks again for any advice from the experts on this forum!

—- Andy Zahn



Submitted by Alan - IRA critic on Wed, 2019-03-27 15:11

  • Yes, the 734 will be added to 2018 wages as long as the excess was not due to Roth 401k contributions. What is interesting is that a post on another forum reports a bug in Ttax that requires a work around and paper filing because the work around could not be e filed. The employer should not issue a revised W-2 and tax software that handles this correctly simply adds up the elective deferrals made on all W-2 forms and to the extent the limit is exceeded will add the excess to wages whether the excess is returned or not (unless it was Roth). 
  • Yes, a 1099R for 2019 will be issued to report the earnings as taxable in 2019. The excess itself is taxable in 2018 as stated.


Submitted by Andrew Zahn on Wed, 2019-03-27 15:49

Alan:  Thank you so much for your prompt and thorough reply !!  I will check into the Turbo Tax bug mentioned on another forum, but pre-filing it seems to handle the excess contribution exactly as you describe.  None of her contributions are directed to a Roth.  I texted my daughter to let her know she doesn’t need to get a revised W-2.  She is greatly relieved!  Thanks again for your advice.  Much appreciated.  — Andy 



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