Hello,

I’m trying to untangle a confusing (to me) situation that has played out over the past few tax years and how to best resolve it tax-wise.

In March 2022, I performed a complete rollover of funds ($34,000) from a previous employer’s 401k (Plan A) to my current employer’s plan (Plan B).

Apparently in 2020, my then-employer’s 401k plan (Plan A) failed non-discrimination testing, resulting in an excess contribution of ~$4,000. For various reasons (including a change of plan administrators), the company did not figure this out until 2023, by which point I had changed employers and rolled over the 401k to my new employer’s plan (Plan B). Company A made additional errors when trying to process the ROE, which resulted in me receiving an incorrect 2022 1099-R for the total rollover coded “G”, which I used to file taxes as normal in April 2023.

In mid-2023 (after filing 2022’s taxes), Plan A’s administrator sent me three different corrected 2022 1099-Rs:

• $30,000 coded “G” – the bulk of the rollover with no tax issues
• $1,000 coded “8” – excess contribution taxable in 2022 (the originally processed ROE value, which turned out to be incorrect)
• $3,000 coded “E” – distribution under EPCRS (apparently because they messed up employees’ SSNs when originally processing the ROE and attributed an incorrect ROE value to my account)

The details in parentheses above I did not find out until June 2024 after much painful back and forth over the course of about a year with my company and the Plan A administrators. As I understand from a similar post on this forum (https://irahelp.com/forum-post/56227-code-e-box-7-form-1099r-distributions-under-employee-plans-compliance-resolution/), I need to direct Plan B to withdraw the $4,000 (plus earnings) that was subsequently deemed ineligible to make my entire 401k balance eligible/compliant.

My question arises from how to report this to the IRS and what additional taxes/fees I may owe because of this debacle. Assuming Plan B does things correctly, I believe I should receive a 2024 1099-R in early 2025 for $4,000 coded either 8 or P. I believe I need to amend my 2022 return to reflect the corrected 1099-Rs from that year, but I’m unclear what to report for 2023 (do I need to amend, since I didn’t receive any actual funds in 2023?) or next year for 2024. Since the ineligible funds sat in the account over the 2023/2024 new year, I think I’ll owe at least 1 year of 10% fee, but I’m unclear if I’ll owe that for 2022/2023 as well (if I do, that feels unfair since I didn’t find out about any of this until mid-2023). Any guidance folks could provide on this would be much appreciated!