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Posted by Ian Pilcher on January 21, 2007, 4:37 pm
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I just received the check for my 2006 excess 401(k)
deferral. The check is slightly larger than the amount of
the excess deferral, due to what the statement calls
"earnings". I know that the amount of the excess deferral
is added to line 7 of my 2006 1040, and the earnings are
taxable in 2007.
How should those earnings be reported in 2007? Do they also
go on the "Wages, salaries, tips, etc." line, or are they
reported as dividends and/or capital gains?
Thanks!
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Ian Pilcher i.pilcher@comcast.net
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Posted by Phil Marti on January 22, 2007, 4:00 am
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> I just received the check for my 2006 excess 401(k)
> deferral. The check is slightly larger than the amount of
> the excess deferral, due to what the statement calls
> "earnings". I know that the amount of the excess deferral
> is added to line 7 of my 2006 1040, and the earnings are
> taxable in 2007.
You must have read something wrong. The earnings are also
taxable in 2006 and go on line 7 of the 1040. See the
instructions for the 1040 and IRS Publication 525.
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Phil Marti
Clarksburg, MD
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<< 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. >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Ian Pilcher on January 26, 2007, 5:39 am
Please log in for more thread options Phil Marti wrote:
> You must have read something wrong. The earnings are also
> taxable in 2006 and go on line 7 of the 1040. See the
> instructions for the 1040 and IRS Publication 525.
I'll definitely have to check on that. One of the papers
that accompanied the check (from Fidelity) includes the
following text:
Return of Excess Distribution Description
Please keep this report for your records. It has been determined that
you made an excess deferral to the above referenced retirement plan in
2006. Under IRS regulations, the excess deferral must be returned to
you along with related earnings. The full amount of the excess
deferral is taxable to you in 2006 and the earnings, if any, are
taxable to you in 2007. If you had a gain on the excess deferral, you
will receive two IRS Forms 1099-R reflecting these corrective
distributions in January 2008.
Your excess deferral amount is $XXX.XX and your earnings amount is
$XX.XX.
I'm pretty sure that I didn't read that wrong. :-)
--
=============================================================
Ian Pilcher i.pilcher@comcast.net
=============================================================
<< ======================================================= >>
<< 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 at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Ian Pilcher on January 26, 2007, 5:39 am
Please log in for more thread options Phil Marti wrote:
> You must have read something wrong. The earnings are also
> taxable in 2006 and go on line 7 of the 1040. See the
> instructions for the 1040 and IRS Publication 525.
Responding again after reviewing Publication 525...
I was under the same impression (that earnings were taxable
in the same year as the excess deferrals) until I received
the distribution check. After looking at Publication 525,
however, it looks like Fidelity is correct.
Page 9 of Publication 525 states, "Any income on the excess
deferral taken out is taxable in the year in which you take
it out." That seems pretty clear, but it doesn't answer the
question of how the income should be reported -- as
interest/dividends/capital gains or just included in the
"Wages, salaries, tips, etc." line of the 1040.
--
=============================================================
Ian Pilcher i.pilcher@comcast.net
=============================================================
<< ======================================================= >>
<< 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 at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Ian Pilcher on January 27, 2007, 12:11 am
Please log in for more thread options Ian Pilcher wrote:
> Page 9 of Publication 525 states, "Any income on the excess
> deferral taken out is taxable in the year in which you take
> it out." That seems pretty clear, but it doesn't answer the
> question of how the income should be reported -- as
> interest/dividends/capital gains or just included in the
> "Wages, salaries, tips, etc." line of the 1040.
.... unless, of course, you scroll down a little bit.
(Where it clearly states that the earnings on the excess
contribution are reported on the "Wages, salaries, tips,
etc." line of your 1040.
That Pilcher guy must be a real idiot!
--
=============================================================
Ian Pilcher i.pilcher@comcast.net
=============================================================
<< ======================================================= >>
<< 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 at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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