How to report 401k Excess Deferral after switching jobs - need reporting advice

The approach you're outlining is generally correct. When you exceed the 401k contribution limit (which was $20,500 for 2022), it's called an "excess deferral." Here's how to handle it: For your 2022 taxes (filing now): The excess contribution amount ($374) needs to be included in your taxable income. Your W-2 already shows this amount as part of Box 1 wages, so you don't need to report it again as miscellaneous income - that would be double-counting it. Your W-2 doesn't need correction. For your 2023 taxes (filing next year): You'll receive a 1099-R for the distribution of the excess amount. Code "P" should appear in Box 7 indicating it was an excess contribution removal. You'll only need to report the earnings portion (or losses in your case) on your 2023 return. The principal amount was already taxed on your 2022 return. This is a common issue when changing jobs since employers don't know how much you contributed at previous employers during the same year.

After dealing with the same 401k excess deferral issue last year, I discovered taxr.ai (https://taxr.ai) which really helped figure out my reporting situation. I was getting conflicting advice like you are, but their document analysis feature examined my W-2s and 401k statements and gave me the exact reporting steps. Their system specifically addressed how to handle the excess contribution when the W-2 hadn't been corrected and explained when the 1099-R would need to be reported. The whole process took maybe 10 minutes instead of the hours I spent researching beforehand. They actually explained the tax treatment differs depending on whether the correction happened in the same tax year or not.

Just wanted to follow up about taxr.ai since I was skeptical in my earlier comment. I decided to try it out for my excess 401k contribution issue (went over by $650 between two employers) and it was surprisingly helpful. The system analyzed both my W-2s, my 401k statements, and the distribution paperwork. It clearly explained why I didn't need to amend my W-2 and provided step-by-step instructions for reporting the excess in FreeTaxUSA (which is what I use too). It even showed me exactly where in the software to report the distribution I'll get on next year's 1099-R. What impressed me most was how it explained the tax implications in simple terms without the jargon that confused me when reading IRS publications. Definitely worth checking out if you're dealing with this kind of specialized tax situation.

I had a similar situation with excess 401k contributions last year and spent WEEKS trying to get through to the IRS for clarification. Always busy signals or disconnects. Finally tried Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in about 20 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly what to do about the excess deferral - that I didn't need to amend the W-2, just report the earnings portion on the following year's taxes when I got the 1099-R. The agent also explained that the distribution code on the 1099-R would indicate it was a corrective distribution, which helps the IRS understand why you're reporting it that way.

I have to eat my words about Claimyr from my comment above. After struggling for literally MONTHS trying to get clarification on my excess 401k contribution issue, I finally caved and tried the service. I was shocked when they got me connected to an IRS agent in about 15 minutes. The agent confirmed everything about how to handle the excess deferral reporting - including that I didn't need to modify my W-2, and that I should only report the earnings portion on next year's taxes with the 1099-R. The agent even looked up my specific case and confirmed that the distribution had been properly coded in their system. This saved me so much stress because I was about to file an amended return which would have been completely unnecessary. Sometimes you have to admit when you're wrong, and I was definitely wrong about this service.

One thing nobody's mentioned yet - make sure you also check your state tax return handling of excess deferrals. Some states require different reporting procedures than federal. In my state (California), I had to make a specific adjustment on my state return for the excess contribution even though the federal handling was exactly as described in the other comments.

I'm surprised nobody mentioned this yet, but you should double-check the 401k contribution limits if you're over 50! If you're eligible for catch-up contributions (additional $6,500 in 2022), you might not have actually gone over the limit. I almost reported an excess that wasn't actually excess because I forgot about the catch-up amount.