How to File Taxes With 401(k) Distributions

Filing taxes with a 401(k) distribution requires additional forms.

Filing taxes with a 401(k) distribution requires additional forms.

In addition to possible matching contributions from your employer, a 401(k) offers you the chance to make tax-deductible contributions and earn tax-deferred income for retirement. Unfortunately, when you take money out of this account, it's time to pay the piper. Everything you withdraw will be taxable at your regular tax rate, even if your earnings came from capital gains such as stock sales. You'll have to declare your 401(k) distributions on your federal and state income taxes.

Collect your Form 1099-Rs. When you take a 401(k) distribution, the plan administrator must send you and the Internal Revenue Service this form showing the amount. This is the official document the IRS will use to calculate your tax liability.

Confirm the amount in Box 1 of your Form 1099-R is accurate. This is the total value of your withdrawal. Cross-reference with your own records to verify the amount.

Enter the distribution amount from your Form 1099-R on your Form 1040. Withdrawals from a 401(k) go on line 16a. If the entire amount is taxable, which is typically the case, enter the total amount on line 16b, too. As you complete the rest of your tax return, the amount of your 401(k) withdrawal will be included in your taxable income.

Include the penalty calculation on any premature withdrawals. If you take money out of your 401(k) before reaching age 59 1/2, the IRS will assess an early distribution penalty of 10 percent on the amount you withdraw. Use Form 5329 to determine the amount of your additional tax and enter this on line 58 of your Form 1040.


About the Author

After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.

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