How to Report Excess 401(k) Contributions on Your Tax Return

To report excess 401(k) contributions on your tax return, add the excess pre-tax deferral to Form 1040, Line 1h as other earned income for the year the contribution was made, and separately request a corrective distribution from your plan administrator so the excess and its earnings are paid out to you by April 15 of the following year.¹ Miss that April 15 date and the same dollars get taxed twice, plus a 10% early distribution penalty if you’re under 59½.

Confirm You Actually Have an Excess

The 2026 elective deferral limit for 401(k), 403(b), and governmental 457 plans is $24,500. Workers 50 and older get an $8,000 catch-up on top, and under the SECURE 2.0 Act, workers who turn 60, 61, 62, or 63 during the year get an enhanced catch-up of $11,250 instead. At 64 you drop back to the $8,000 figure.² Use the wrong ceiling for your age and you’ll calculate the wrong excess.

To find the overage, check Box 12 on every W-2 you received for the year. Code D covers 401(k) elective deferrals, Code E covers 403(b) deferrals, and Code AA covers designated Roth 401(k) contributions.³ Add the amounts across all your W-2s. Anything over your applicable limit is the excess.

This usually happens when you work for two employers in one year, either sequentially or simultaneously, and both withhold deferrals without knowing what the other is doing. Each employer only tracks its own plan. The IRS puts the responsibility for catching and fixing the excess on you, not on either employer.

Request the Corrective Distribution First

Before you file, notify at least one of the plan administrators in writing that you need the excess returned. The deadline for the notice is March 1 of the year following the excess. The letter should identify the calendar year of the excess, the exact dollar amount you want distributed, and include copies of your W-2s showing the combined deferrals.⁴ Most large recordkeepers have a Return of Excess Contributions form you can ask for.

The administrator then calculates the net income attributable to the excess (the gain or loss those excess dollars generated in the account) and distributes both the principal and the earnings back to you. The full corrective distribution has to be completed by April 15 of the year after the deferral to preserve the favorable tax treatment.⁵

Don’t stack this up against the April deadline. Plan administrators need lead time to run the earnings calculation and cut the check. A mid-March request risks having the distribution clear after April 15, which converts a fixable problem into an expensive one.

Enter the Excess on Form 1040, Line 1h

The excess principal from pre-tax deferrals goes on Form 1040, Line 1h, the field for other earned income. That’s where the IRS expects to see excess elective deferrals that weren’t included in Box 1 wages on your W-2.¹ In tax software, look for a field labeled “excess salary deferrals” or “other earned income” and enter the amount there.

The principal is taxed in the year the contribution was made, regardless of when the corrective distribution actually lands in your bank account. The earnings, if the distribution is timely, are taxable in the year you receive the distribution rather than the year of the contribution.⁶ Two pieces, potentially across two tax years.

Adding the excess to Line 1h raises your total income, which either increases what you owe or shrinks your refund. Pay any additional tax by the filing deadline to avoid interest.

Roth 401(k) Excesses Work Differently

Designated Roth 401(k) contributions share the same $24,500 annual limit as pre-tax deferrals and are combined with them when measuring the excess. But because Roth contributions were already made from after-tax dollars, Box 1 of your W-2 already includes them. You do not add a Roth excess to Line 1h.¹ Only the earnings portion of the corrective Roth distribution is taxable when you receive it.⁷

If your excess came from a mix of pre-tax and Roth deferrals, split it. The pre-tax portion goes on Line 1h. The Roth portion doesn’t need income reporting on your current return, but you still have to request the corrective distribution and report the earnings when they arrive.

The 1099-R That Arrives the Following Year

In January after the corrective distribution, the plan administrator sends Form 1099-R. The distribution code in Box 7 controls which tax year the amounts belong to.

Code P means the excess and earnings are taxable in the prior year. This is what you’ll typically see when the distribution processes early in the calendar year but relates to the previous year’s excess.
Code 8 means the excess and earnings are taxable in the current year, which is what appears when the corrective distribution is processed in the same calendar year as the excess.

When Code P appears, the principal on the 1099-R should match what you already reported on Line 1h of the prior-year return.⁸ Compare them. Then, on the current-year return, include only the earnings from the 1099-R as income. Do not re-report the principal. Reporting it again is the single most common way people pay tax twice on money the corrective distribution was designed to protect.

What Missing April 15 Costs You

The April 15 deadline is not flexible. If the excess stays in the plan past that date, the same dollars are taxed in the year they were contributed and taxed again when they eventually come out.⁵ A timely correction eliminates the second layer. A late correction does not.

A timely corrective distribution is also exempt from the 10% early distribution tax that otherwise applies to withdrawals before age 59½, and that exemption covers both the excess and its earnings.⁹ Miss the deadline and the exemption disappears. A late corrective distribution is treated like any other early withdrawal: 10% penalty on top of income tax, and the plan may be required to withhold 20% for federal taxes before sending you the check.¹⁰ Any employer match tied to the excess deferrals is typically forfeited back to the plan as well.

If You Receive a CP2000 Notice

Even a clean return can trigger a CP2000 notice from the IRS Automated Underreporter system when a Code P 1099-R shows distribution income in one year and the tax was actually paid on the prior-year return. A CP2000 is not a bill and does not mean you made a mistake. It means the automated matching couldn’t reconcile the two records.¹¹

Respond with a copy of the prior-year return showing the Line 1h entry, the written corrective distribution request you sent to the plan administrator, and copies of the W-2s that establish the combined deferrals. That documentation lets the IRS confirm the tax was already paid and withdraw the proposed adjustment.¹²

Keep every document from the correction for at least four years after filing: W-2s, the request letter to the administrator, the corrective distribution confirmation, the 1099-R, and both years’ returns. That paper trail is what turns a CP2000 response into a short letter instead of a long argument.

1
Internal Revenue Service. 1040 (2025) – Section: Line 1h
2
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
3
Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 – Section: Box 12 Codes
4
eCFR. 26 CFR 1.402(g)-1 – Limitation on Exclusion for Elective Deferrals
5
Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan
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Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498 – Section: Excess Deferrals
7
Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
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Internal Revenue Service. Instructions for Forms 1099-R and 5498
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Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
10
Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g)
11
Internal Revenue Service. Topic No. 652, Notice of Underreported Income – CP2000
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Internal Revenue Service. Understanding Your CP2000 Series Notice