How does the ADP/ACP plan refund affect my taxes?
You do not have to amend your return for the year you contributed to the plan. The impact on your taxes this year depends on the following:
- The type of deferral. If you made a pre-tax contribution it reduced your taxable income for the year it was contributed. Therefore, the Code requires you to recognize the refund as income in the year of receipt. If you made a Roth deferral, you received no income reduction in the year contributed and do not need to recognize income in the year of receipt.
- Whether a matching contribution is included. If the limit on matching contributions was exceeded, the match portion of the refund is taxable income to you. This amount was not originally taxed.
- Earnings. Regardless of whether your refund consists of pre-tax or Roth deferrals, the earnings (if any) are taxable income to you.