Excess Salary Deferral 401K

[cipparulo12345]

Client has excess 401k salary deferral for 2021 because he changed jobs. The amount is around $7,000. I told him to contact employer and they need to reimburse him the excess plus earnings on the excess before 4/15/22 and then get a corrected W-2 otherwise he would be taxed twice. Once this year because he would have to show the excess as wages and then again when it is distributed. He said he would do that but he does not understand how correcting it makes a difference with the double taxation. He said if he gets it corrected his W-2 wages will go up by the excess deferral so he is paying tax on it anyway.
His logic is strange but could not give him a better answer. Does anyone have a better answer?

[FEDUKE404]

1. His wage income will need to increase because the total of his 2021 taxable wages changes (via a corrected 2021 W2)
2. Any "bad" earnings directly resulting from the excess contributions, from time of money in to time of money out, will be calculated and reported separately on a Form 1099-R. There likely will be a 2022 Form 1099-R issued some time later. There may in fact be two of those, one for the 2021 earnings (think amended return) and one for any 2022 earnings prior to the apparently pending reepair.

Two separate issues entirely. Another good reason for an employee to get things straight whenever changing employers.

[cipparulo12345]

Thanks. I read up on this after my post. Plus I told him that if he does not get it corrected by 4/18/22 he gets taxed in 2021 for the excess deferrals and then again when the corrective distribution is made.