Client made excess deferrals of $1200 in 2001. With market being down there was a loss so only $800 was distributed. What is the correct coding on the 1099-R. Our paying agent issued one showing the $800 in box 1 and $1200 in box 2A, but shouldn't the loss be reflected somewhere on the form as well?

No the loss for income tax purposes is not usable to the individual. Losses in the plan impact the plans fund balance. and like income are tax exempt.

many Participants view contributions as their money, and it is when distributed. But while in the Trust it is just part of a tax exempt entity and the tax consequenses in general to not flow to the Participant

Brett

Brett -

Is this due to the fact that the corrective distributiuon was done in the same year of the excess deferral? In reading the 1099-R instructions it seems to state that if the correction was done in the following year the 1099-R would only report the amount of the distribution in box 1 & 2A (in this case $800). Taxpayer still needs to include the full excess deferral amount (in this case $1200) as income in year of deferral, but "they may report a loss on the tax return for the year the corrective distribution was made". I guess the recipients main concern is that there are 2 different amounts reported on the 1099-R which might raise a red flag.

Brian

Correction to last message - 1099 issued listed the actual deferral amount in box 1 & 2A, not the distribution amount.