How to report and correct a 401(k) excess contirbution, without a distribution

M4tLgRhi

I worked two jobs and between the two, I over contributed about $500 on the sum of both 401(k)'s. Unfortunately since neither job say I over contributed on their individual plans, both are denying my ask for a distribution to correct the excess contribution.

Since the overage won't be withdrawn, do I simply need to report the $500 as 1H other income, and that's it? Also wondering how to include this in FreeTaxUSA since I can't find an option to add this type of income.

CoryF

Hello.

That is a difficult situation. However, it is your retirement savings, and the two jobs don't have the right to refuse to withdraw the sum from either plan. My suggestion is to call back and report that you were doing your taxes and was told that you would have $500 overcontribution to your 401(k). If there was no withdrawal, you would have to pay 6% on the $500 every year until withdrawn. That should motivate one or the other job to comply with your request to withdraw the $500.

As for how to report it, the financial institution that will distribute the $500 will issue a 1099-R with a distribution code in box 7. Since this is the year 2025, you won't receive that 1099-R until next year on or after January 30th. This income will belong on the 2024 tax return and the 2025 1099-R box 7 code will direct you to Amend your 2024 return in 2026. We don't currently have a solution for how to report it on your original tax return.

Here is a similar discussion that provides information about this process (change 2023 to 2024 as the laws and processes have not changed)