Hi I had two employers (not simultaneously) in 2008. I contributed to both the 401k plans. The total was in excess of the limit for 2008. When I found out, I informed my second employer's 401k institution sometime in April 2009. They processed my request and sent me a check for the excess and the transaction was made by them on April 15
I have not yet filed my 2008 taxes since I have filed an extension.
Here is what the letter from the 401k institution (I guess institution is the wrong word, but the correct word escapes me) says
--quote-- The excess deferral amount may be taxable income for 2008. The gains if any are taxable income for 2009.
If the excess deferral experiences a decrease in value, the taxable amount is the full deferral amount, unadjusted for loss. This amount will be greater than the amount reported on form 1099-R
You will received two form 1099-Rs for this distribution in January 2010. Keep a copy of this letter and the Form 1099-Rs you received for your records.
This distribution is not eligible for roll-over into another qualified plan, or any IRA.
It is our understanding that this distribution is not subject to 10% early distribution tax
--end quote--
The excess amount is about $3100 They gave an additional check for about $15 that I think is the gains.
My tax software error check says I have excess contribution.
Summary is excess contribution to 401k in 2008 received distribution of excess on April 15 2009 expected to receive 1099-Rs in January 2010
I called IRS and they said I should add the income to the 2008 1040 line 7 and next year when I receive the 1099-Rs those forms would have appropriate information that tells IRS that the income was in prior year and already taxed.
Is that good advice? How should I go about doing this - simply add the amount to what the software(I use taxcut) computes for 1040 line 7 for $3100 ?
Should I attach a piece of paper explaining anything with my return?
-Antony