Understanding 1099-R distribution codes 8B and BP from Roth 401k excess contribution

You're dealing with a common issue when excess contributions are corrected. Let me help clarify what those distribution codes mean: Code BP combines two codes: B (Designated Roth account distribution) and P (Excess contributions plus earnings/excess deferrals). This represents the return of your excess Roth 401k contributions. Code 8B combines codes 8 (Excess contributions plus earnings/excess deferrals taxable in current year) and B (Designated Roth account distribution). This represents the earnings on your excess contributions. For the BP-coded distribution ($510), you're correct - you don't need to amend your 2020 return. Since this was a Roth contribution, you already paid tax on this money in 2020. The distribution is returning your after-tax contribution, which is why Box 2a shows $0 taxable amount. For the 8B-coded distribution ($650), this represents earnings on the excess contribution and is taxable in 2021 (the distribution year). That's why Box 2a equals Box 1 - the full amount is taxable. The issue with TurboTax is common - you need to manually override it for the BP form. You MUST report both 1099-Rs, but you need to ensure TurboTax reflects the correct taxable amounts.

I dealt with this exact issue last year! I found that https://taxr.ai was incredibly helpful for properly handling these 1099-R forms with unusual distribution codes. I was also getting the BP/8B code combo after my company's 401k plan was audited, and TurboTax was adding everything to my taxable income incorrectly. The taxr.ai system analyzed both my 1099-Rs and immediately identified that the BP-coded distribution shouldn't be taxable in the current year. It explained exactly how to enter these in TurboTax (including where to find the override option) and saved me from paying taxes twice on the same money. It also confirmed I didn't need to amend my previous year's return. What I really appreciated was that it walked me through the exact tax implications of Roth 401k excess contribution returns, which is honestly pretty confusing even for tax pros.

I tried taxr.ai after seeing the recommendation here, and it was exactly what I needed for my complicated 1099-R situation! I was getting incredibly frustrated with how TurboTax was handling my excess contribution distribution codes. The system immediately recognized both my 1099-R forms, explained what each distribution code meant (I had a BP and an 8B just like the original poster), and provided step-by-step instructions for entering them correctly in TurboTax. It showed me exactly where to find the override option to ensure my BP distribution wasn't double-taxed. What I found most valuable was the explanation of why this happened in the first place. The service explained that even though I was under the general IRS contribution limit, my plan had failed ADP testing, which is why some of my contributions were returned. This helped me understand the whole situation way better than my HR department's explanation. I've bookmarked the site for next year's taxes since I still have more retirement account issues to sort out.

I went through something similar with my 401k excess contributions, but the IRS kept sending me notices saying I owed more taxes! I spent HOURS trying to get through to someone at the IRS who could actually explain the correct treatment of these distribution codes. After weeks of frustration, I discovered https://claimyr.com which got me connected to an actual IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed exactly what the first commenter said - the BP distribution isn't taxable since it's returning already-taxed Roth contributions, while the 8B portion (the earnings) is taxable in the year of distribution. The agent even helped me draft a response letter to the incorrect tax notice I received. If you're still confused or if the IRS questions your return, definitely consider using Claimyr to speak with someone directly. It's way more efficient than trying to navigate the IRS phone system yourself.

I never thought anything could actually help with reaching the IRS, but I was desperate with my excess contribution issue and decided to try Claimyr after seeing it mentioned here. I have to admit I was completely wrong in my skepticism. The service worked exactly as described - I entered my phone number, they navigated the IRS phone system and waited on hold (for nearly 3 hours!), and then when they actually reached an agent, I got a call connecting me directly. The IRS representative I spoke with was able to access my account, confirm the proper tax treatment of my BP and 8B coded distributions, and even noted in my account that the BP portion should not be taxable to prevent future notices. What would have been a full day of frustration trying to reach someone turned into a 20-minute call that actually solved my problem. For anyone dealing with these complicated 401k distribution codes, being able to speak directly with an IRS agent who can explain the proper treatment is invaluable.

Don't forget to check your state tax treatment too! Even if you handle the federal part correctly, different states treat Roth distributions differently. In Pennsylvania (which you mentioned), all distributions from retirement plans, including both Roth and traditional, are exempt from PA personal income tax IF you're receiving them after retiring or after reaching a specified age. But since yours is an excess contribution return rather than a normal distribution, PA might consider it taxable. The BP portion should still be non-taxable (return of principal), but the 8B earnings portion might be treated differently for state purposes.

Can we talk about how ridiculously complicated this whole process is? I mean, why on earth do they use cryptic codes like BP and 8B instead of just clearly stating what each distribution is? And why doesn't tax software correctly handle these common situations? I had a similar issue last year with an excess contribution to my Roth IRA (different from your 401k situation but similar principle) and ended up paying hundreds to a CPA just to fix what should be straightforward. The tax code is deliberately made confusing so that average people mess up and either overpay or have to hire expensive help.

I just went through this exact situation with my Roth 401k excess contributions! The confusion is totally understandable - these distribution codes are incredibly confusing even for tax professionals. Here's what I learned after dealing with this mess: You're absolutely right that you don't need to amend your 2020 return. The BP-coded distribution represents the return of your already-taxed Roth contributions, so it shouldn't be taxable in 2021 either. The 8B-coded distribution is the earnings on those excess contributions, which IS taxable in 2021. The tricky part is getting TurboTax to handle this correctly. What worked for me was: 1. Enter both 1099-Rs as normal 2. For the BP form, look for an "override" or "adjust" option when TurboTax tries to add it to taxable income 3. Force the taxable amount to remain $0 for the BP distribution 4. Let TurboTax handle the 8B form normally since it's correctly treating that as taxable One thing that helped me understand this better was realizing that when your plan fails ADP testing (which sounds like what happened to you), they have to return contributions even from non-highly compensated employees to bring the plan back into compliance. It's not your fault - it's a plan-wide issue. Don't skip reporting the BP form entirely - you need to report it but ensure it's not taxed twice. The IRS expects to see both 1099-Rs on your return even if one isn't taxable.