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Help with 1099R for 2007 with Distribution code P

I received a 1099R for the tax year 2007, with distribution code "P"

-- which says "Excess contributions plus earnings / excess deferral taxable in 2006". Both line 1 and 2a are listed with equal $ amount. The actual amount was sent by Fidelity in year 2007, not 2006.

I must report this 1099R, but TaxCut and TaxACT handle this differently as TaxCut says to amend 2006 Return and TaxACT adds it to

2007 income.

Since excess contributions are returned in a year (2007) which is different than the year the excess contribution was made (2006). Doesn't this get reflected on the W-2 the company sends and already taxed?

Do I need to file 1040X for 2006 to handle this and would that mean additional Tax payments for 2006 (recalculation of 2006 taxes with this amendment). If this is the case how can I calculate what additional payments to make and is there any penalty on top of that?

Any help will be greatly appreciated.

Thanks

Reply to
rajchaudhry
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But, as stated, it is taxable in 2006.

No, that is the problem. It was never included in your 2006 W-2 box 1 and now needs to be added back as wage income.

In this group I've read that if you know about the issue prior to filing the return in question, you can include the amount "in advance" of the

1099-R and thus avoid the necessity to amend a year later -- makes sense to me. You basically need to enter a substitute 1099-R code 8 for the taxable year instead of a code P for the following year.

Yes. The process of amending a return includes re-calculating the original return with the new items. Software does it easily. Interest and penalties can be calculated by the IRS

-Mark Bole

Reply to
Mark Bole

A distribution reported on a 2007 1099-R with distribution code P means the plan returned the 2006 excess deferral to you in 2007 but on or before March

15, 2007. An excess deferral that is returned to a plan participant by March 15 of the following year is taxable on the previous year's return, i.e., in your case the distribution is taxable on your 2006 return. Excess deferrals normally are reported as wages on Form 1040, line 7. Since you have filed already for 2006 and need to amend your return, the unreported income is shown on Form 1040X, line 1, column B. You need to explain the source and type of the additional income in Part II of Form 1040X.

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IRS does not normally assess penalties for additional income reported on Form 1040X. By law, you will owe interest computed from April 15, 2007. IRS compounds interest daily at the applicable quarterly rate. The quarterly rates are listed on the web page linked below. See the first table under "Interest Rate on Noncorporate Overpayments and Underpayments."

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Condor

Reply to
Condor

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