Form 1099-R Code E: Is Returning Excess After-Tax 401k Contributions Taxable?

If the IRS already sent a notice, does that mean they've already processed the return incorrectly? Or is this just a proposed adjustment? Also, is there a specific form I should use to dispute this?

The notice is likely a proposed adjustment, which gives you time to respond before anything is finalized. You should respond within the timeframe specified on the notice, usually 30 days. You don't need a specific form to dispute this - just write a clear, concise letter explaining that the distribution was a return of after-tax contributions as evidenced by Box 5 equaling Box 1 on your 1099-R. Include a copy of your 1099-R and the notice you received. Mail your response to the address provided on the notice, and I recommend sending it via certified mail so you have proof of delivery.

How exactly does this work? Do you just upload your tax forms and it analyzes them? I've got a similar issue but with code G and I'm totally confused.

Sounds interesting but how accurate is it really? I've used tax software before that completely missed important details about my 401k distributions. Does it actually understand all these weird distribution codes?

You just upload your tax documents and it analyzes them within minutes. The system looks at all the boxes on your forms and compares them to tax regulations to spot issues. For 1099-R forms specifically, it checks the distribution codes and box values to determine the correct tax treatment. The accuracy has been impressive in my experience. It specifically understands all the distribution codes (A through Z) and what they mean for taxation. For 401k and IRA distributions, it knows how to interpret the relationship between different boxes on the 1099-R and can tell you whether the IRS is handling your situation correctly based on current tax law.

Wait, how does this actually work? The IRS phone system is impossible to navigate. Does this actually get you through to a real person?

This sounds kinda sketchy tbh. How can a third-party service magically get you through to the IRS when their phone lines are constantly jammed? I've literally tried calling 20+ times over multiple days and couldn't get through.

It works by using their system that continuously calls the IRS and navigates the phone tree for you. When they secure a spot in the queue, they call you and connect you directly to that spot in line. Instead of you personally having to call repeatedly and wait on hold, their system does it for you. Yes, it absolutely gets you through to a real IRS agent. It doesn't bypass any security or rules - it just handles the frustrating part of repeatedly calling and waiting on hold. Once connected, you speak directly with the same IRS representatives you would eventually reach if you spent hours calling and waiting yourself. The difference is you only need to be on the phone when there's actually an agent ready to talk.

Thanks for sharing your experience! Did you end up having to file an amended return, or were you able to get it resolved by just responding to the IRS notice?

I didn't need to file an amended return. I just responded to the IRS notice with a detailed explanation and a copy of my 1099-R. I highlighted Box 1 and Box 5 showing the identical amounts and explained these were after-tax contributions being returned. The IRS accepted my explanation and canceled the proposed adjustment about 6 weeks later. They sent a letter confirming no additional tax was due. Just make sure to respond within the deadline given on the notice, and keep copies of everything you send them.

I called about a similar issue last year. If you can actually reach someone (big if), they can be helpful. I got through after 3 attempts and about 90 minutes on hold. The agent was able to see that my 1099-R boxes matched and noted my account that no additional tax was due. Still got a confirmation letter about a month later.