Received confusing 1099-R ... Which year to file?

Question

Wife is a teacher.  She was in a tier  of her retirement system that required contributions.  In the middle of this current school year she bought back some previous years of

service, which pushed her into a higher tier where contributions are no longer required.  Because of this, she was refunded her contributions (taken via pre-tax paycheck deductions) that had been made during this current school year.  This was processed on 2/29/2024 and she received a check reimbursing her for the amount of the current year contributions.

Now getting to my question...She also just received a 1099-R from the school district reporting the amount of the reimbursement.  Since those contributions had been taken pre-tax, we now need to report them as taxable income.  The 1099-R was printed on a form with a 2023 heading, but the Date of Payment (box 13) shows 02/29/2024.

Do I need to amend our 2023 return with this form, or is this reportable on our 2024 return?

Henry · Answer

https://community.freetaxusa.com/discussion/comment/1685#Comment_1685

Thanks for clarifying that. Code 7 in Box 7 indicates that it is a normal distribution from the retirement account. The code does not indicate that this distribution was considered a return of excess deferrals, so the information I previously provided likely does not apply to your wife's situation. The code in Box 7 along with the fact that the 1099-R has a 2023 heading would generally indicate that it is expected to be reported on your 2023 tax return. As a normal distribution from a pension plan, it will be taxed as retirement income on line 5 of Form 1040. The amount that is taxable will depend on the amount showing in Box 2a of the 1099-R.

You may want to have your wife reach out to her plan administrator to make sure that the Form 1099-R was reported correctly. If it was, then you can amend your 2023 return to include it.

eengert · Answer

Box 7 has code "7" in it.  How does that impact the situation?

Thanks.

Henry · Answer

Hi eengert, it sounds like after the move to the higher tier, your wife's prior contributions for 2023 may have been considered excess contributions and were returned to her. Does the Form 1099-R that she received have code 8 in box 7? If that is the case and the distribution she received should be treated like excess deferrals, then here's how that needs to be reported:

-If the excess was taken out in 2024 and you are able to receive the corrective distribution by April 15 (which it sounds like is what happened), then you need to include it in wages for 2023.

-Any income on the excess deferral taken out is taxable in the tax year in which it was taken out (2024).

(see "Excess distributed to you" on pg 11 of IRS Publication 525)

This means that you may need to amend your 2023 return to include this income if you have already filed. To do that, select 'Account' near the top of the screen and click on 'Amend Tax Return.' The software will walk you through the amendment process from there. After entering some initial information about your original return, you can select Income > Common Income > Retirement Income (1099-R) from the menu to enter the 1099-R information. When you are done, go through the Final Steps menu to finalize the amendment.

Next year when you file your 2024 tax return, you should report any earnings on the excess deferral on your 2024 tax return.