How to handle 1099-R with distribution code P (taxes paid on 2006 return)
Bhoot Nath
contribution for 2006 was categorized as excess and retfunded (with a
small earnings). This was included in my 2006 tax calculations, and I
paid the extra federal and state taxes.
Now, I have 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 as $6K. When
enter this in tax software, the amount automatically rolls to Form
1040 line 16a and 16b.
But this is not right! I already paid taxes on this in 2006, so I
should not have to pay taxes again on the 2007 return.
Since I received the 1099R, I must report it. I think it should go in
line 16a, but should be excluded from line 16b. But TaxACT is not
doing it this way... I have an optiobn to override, but I want to
understand it first.
How do I report the amount from 1099R (so I don't get nastygram from
IRS), but still avoid double taxation, since I already paid taxes in
2006? The code P's meaning is clear, but how to actually make that
happen?
Bhoot Nath
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Bhoot Nath
Condor
> contribution for 2006 was categorized as excess and retfunded (with a
> small earnings). This was included in my 2006 tax calculations, and I
> paid the extra federal and state taxes.
>
> Now, I have 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 as $6K. When
> enter this in tax software, the amount automatically rolls to Form
> 1040 line 16a and 16b.
If the distribution were taxable on your 2007 return, the software should
carry the taxable amount to line 7 (wages), not line 16. In fact, that's
where it should have been reported on your 2006 return. Are you sure you
have the 1099-R codes entered correctly in your software?
Since the 1099-R shows distribution code P, IRS will expect to see the
income on your 2006 return, not 2007. Just delete the 1099-R from your 2007
software.
Condor
Bhoot Nath
> > In 2007 I was deemed an HCE; as a result, about 6K of my 401K
> > contribution for 2006 was categorized as excess and retfunded (with a
> > small earnings). This was included in my 2006 tax calculations, and I
> > paid the extra federal and state taxes.
>
> > Now, I have 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 as $6K. When
> > enter this in tax software, the amount automatically rolls to Form
> > 1040 line 16a and 16b.
>
> If the distribution were taxable on your 2007 return, the software should
> carry the taxable amount to line 7 (wages), not line 16. In fact, that's
> where it should have been reported on your 2006 return.
Condor, Yes, in the 2006 return, it was added in line 7 and, all
applicable taxes were paid.
The 1099R that I have received has "2007" in big bold font on top, so
that's why I thought it should be reported somewhere on this year's
taxes.
> Are you sure you
> have the 1099-R codes entered correctly in your software?
Yes, I double checked. I have entered code as "P" in the software,
same as on the form.
>
> Since the 1099-R shows distribution code P, IRS will expect to see the
> income on your 2006 return, not 2007. Just delete the 1099-R from your 2007
> software.
>
> Condor
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, >>
> << nor can it used, for the purpose of avoiding penalties >>
> << that may be imposed upon the taxpayer. >>
> << >>
> << The Charter and the Guidelines for submitting posts >>
> << to this newsgroup as well as our anti-spamming policy >>
> << are atwww.asktax.org. >>
> << Copyright (2007) - All rights reserved. >>
> << ------------------------------------------------------- >>
========================================= MODERATOR'S COMMENT:
Please delete unnecessary text from the prior message when responding.
removep...@yahoo.com
> Now, I have 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 as $6K. When
> enter this in tax software, the amount automatically rolls to Form
> 1040 line 16a and 16b.
This is a problem with TaxAct. With other tax programs, when you
entered a 2007 1099-R with distribution code P, the amount does not
get added to line 16a ot 16b as it was for a prior year. But with
TaxAct, it does. I think the solution is to not enter the 1099-R into
TaxAct. I guess you did enter this 6k into your 2006 return or 2006
amended return, on line 7 (wages)? Any earnings from that 6k would
also be refunded to you in 2007, and that would appear on your 2007
return as a taxable IRA distribution but there would be no penalty.
How many 1099-R's did you receive?
Phil Marti
> I guess you did enter this 6k into your 2006 return or 2006
> amended return, on line 7 (wages)?
That's what he said.
> Any earnings from that 6k would
> also be refunded to you in 2007, and that would appear on your 2007
> return as a taxable IRA distribution but there would be no penalty.
It has nothing to do with IRAs, and if the earnings on the excess were
distributed in time, they were also 2006 income on line 7 of the 1040. See
Publication 525.
As everyone, including you, has advised OP, you report nothing regarding a
2007 1099-R with code P on your 2007 return. If the total was reported on
line 7 of your 2006 return there's nothing else to do. Otherwise, the
appropriate action is an amended 2006 return.
--
Phil Marti
Clarksburg, MD
removep...@yahoo.com
> > I guess you did enter this 6k into your 2006 return or 2006
> > amended return, on line 7 (wages)?
>
> That's what he said.
True. I was just qualifying that it should go on line 7.
> > Any earnings from that 6k would
> > also be refunded to you in 2007, and that would appear on your 2007
> > return as a taxable IRA distribution but there would be no penalty.
>
> It has nothing to do with IRAs, and if the earnings on the excess were
> distributed in time, they were also 2006 income on line 7 of the 1040. See
> Publication 525.
But it's possible to get 2 1099-R's. My source is
http://www.irs.gov/instructions/i1099r/ar02.html#d0e669
<Quote>
Excess deferrals. Excess deferrals under section 402(g) can occur in
section 401(k) plans or section 403(b) plans or SARSEPs. If
distributed by April 15 of the year following the year of deferral,
the excess is taxable to the participant in the year of deferral, but
the earnings are taxable in the year distributed.
</Quote>
In any case publication 525 says the earnings may be taxable in the
year of the contribution or the year of the distribution, depending on
factors such as 2½ months after the close of the plan, $100 threshold,
etc.