Excess 401k contribution

Technical topics regarding tax preparation.
#1
jdctax  
Posts:
15
Joined:
23-Apr-2014 6:13pm
Location:
Los Angeles, CA
I have a client who over contributed to his 401k for 2020. Had 2 different employers and maxed out 401k with both. It was jus discovered when I worked on his return and we have clearly missed the April 15th deadline to remove the excess contribution. I was trying to figure out how to handle this and came across this discussion:
viewtopic.php?f=8&t=12065&p=109585&hilit=excess+401k#p109585

From what I've read there and researched elsewhere it seems we need to report a "distribution" of the excess contribution in 2020. I assumed he'd have to actually distribute the excess plus earnings and report that in 2021 but sounds like he doesn't actually have to distribute the excess. He just has to report the income a second time in 2021. So basically he loses the deduction in 2020 AND picks up income in 2021 but can leave the funds in the 401k. Is that right?
 

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