Excess contributions returned to employee

[kamckinley]

Hi All,

I have a client who had excess contributions returned to him, and want to make sure I report it correctly...

1. He received a check in 2007 for 2006 excess contributions, but failed to tell me about it. Received a 1099-R in 2007 coded P in box 7. If I understand correctly, this should have been reported on his 2006 tax return. Do I need to amend his 06 return, or can I report it on 07?

2. Received 2 checks in 2008 for 2007 excess contributions. One check is for his contributions, the other is for the employer match. No 1099-R (won't receive until Jan 2009). Do I report both amounts on line 7 of Form 1040?

Thanks!

[Roland Slugg]

Report the 2006 refund on an amended 2006 return. (If $100 or less, it can be reported on the T/P's 2007 return.)

Report the 2007 refunds on his 2007 returns, coded Code P. The amounts should flow to line 7. Your client will receive a 1099-R for these refunds next year, and you may enter them again, also coded Code P, but next year show the taxable amount as $0.

This subject has come up several times in recent days on this forum.

I'm surprised he received the employer's match, since the match is usually based on actual allowed deferrals. Perhaps the extra was income earned on the excess deferral during the time it was invested by the plan/fund.