2003 1099-R with a Code P Distribution Code

Discussion in 'Tax' started by Ken, Apr 2, 2004.

  1. Ken

    Ken Guest

    401(k) Excess Contributions

    I understand that this is a fairly common situation, I just
    never hit it yet. I figured that someone else here may have.

    Fact Pattern
    1. Client that made the maximum allowed 401(k) contributions
    in 2002 (Per W-2).

    2. Client is a highly paid employee.

    3. It appears client's employer did not complete excess
    contributions testing until 2003.

    4. Employer determined client made excess contributions and
    returned excess contributions to employee in 2003.

    5. No adjustment was made for excess contributions in 2002's
    income tax return (i.e., Taxable Wages do not reflect the
    excess contributions returned to client in 2004).

    6. In 2004, client receives a "2003 1099-R" with a "Code P
    Distribution Code". The "2003 1099-R" with a "Code P
    Distribution Code" also contains an amount of tax withheld.

    Here is what I think I should be doing.

    1. Amend the client's 2002 income tax return to include the
    income as shown on the "2003 1099-R" with a "Code P
    Distribution Code".

    2. On the 2003 income tax return, the amount on the "2003
    1099-R" with a "Code P Distribution Code" is not taxable.
    However, the amount of federal tax withheld on the "2003
    1099-R" with a "Code P Distribution Code" is included as a
    tax withheld for 2003.

    Any advice is greatly appreciated. Thanks in advance.

    Best Regards,
    Ken

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    Ken, Apr 2, 2004
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  2. Ken

    Phil Marti Guest

    (Ken) writes:

    > In 2004, client receives a "2003 1099-R" with a "Code P
    > Distribution Code". The "2003 1099-R" with a "Code P
    > Distribution Code" also contains an amount of tax withheld.
    >
    > Here is what I think I should be doing.
    >
    > 1. Amend the client's 2002 income tax return to include the
    > income as shown on the "2003 1099-R" with a "Code P
    > Distribution Code".
    >
    > 2. On the 2003 income tax return, the amount on the "2003
    > 1099-R" with a "Code P Distribution Code" is not taxable.
    > However, the amount of federal tax withheld on the "2003
    > 1099-R" with a "Code P Distribution Code" is included as a
    > tax withheld for 2003.


    Correct.

    Phil Marti
    Topeka, KS

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    Phil Marti, Apr 5, 2004
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  3. "Ken" <> wrote:

    > 401(k) Excess Contributions
    >
    > I understand that this is a fairly common situation, I just
    > never hit it yet. I figured that someone else here may have.
    >
    > Fact Pattern
    > 1. Client that made the maximum allowed 401(k) contributions
    > in 2002 (Per W-2).
    >
    > 2. Client is a highly paid employee.
    >
    > 3. It appears client's employer did not complete excess
    > contributions testing until 2003.
    >
    > 4. Employer determined client made excess contributions and
    > returned excess contributions to employee in 2003.
    >
    > 5. No adjustment was made for excess contributions in 2002's
    > income tax return (i.e., Taxable Wages do not reflect the
    > excess contributions returned to client in 2004).
    >
    > 6. In 2004, client receives a "2003 1099-R" with a "Code P
    > Distribution Code". The "2003 1099-R" with a "Code P
    > Distribution Code" also contains an amount of tax withheld.
    >
    > Here is what I think I should be doing.


    Excess contributions are taxed to the employee in the year
    they are returned to the employee. They are reported on a
    1099R ~only~ if the excess is returned in a year different
    than the year the excess contribution was made (so if the
    employee exceeds the contribution limits and the excess is
    returned in the same year, it all gets reflected on the
    W-2). Do not amend prior year returns.

    --
    Paul A. Thomas, CPA
    Athens, Georgia
    taxman at negia.net

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    Paul A Thomas, Apr 5, 2004
    #3
  4. Ken

    Phil Marti Guest

    "Paul A Thomas" <> writes:

    > Excess contributions are taxed to the employee in the year
    > they are returned to the employee.


    I disagree. See page 8 of IRS Publication 525.

    Phil Marti
    Topeka, KS

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    Phil Marti, Apr 7, 2004
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