We have an employee that the 401K administrator deemed highly compensated so we are refunding the money. How should this refund be done through payroll or other check and if other do we report with an 1099R? And if so what boxes should be used on the 1099 and how should the employee report it on their tax return? And is it possible to roll over to their own IRA somewhere?

Thanks!

This is a complex subject that simply should NOT be addressed on this kind of forum.

Contact a competent tax professional for paid advice on how to deal with this issue.