401K involuntary distribution taxes

401K involuntary distribution taxes
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#1

Company closed out my 401k, sent me the distribution minus the taxes. I rolled-over the distribution and repaid the taxes out of my own pocket. How do I show those taxes on my return?


#2

Kudos on the rollover, @roland5432! So much money leaks out of retirement plans through cash-outs and distributions like this. One study estimated the typical cash out will cost the worker $300,000 once the lost future tax-deferred returns are added to the taxes and penalties.

You should’ve gotten a 1099 showing the taxes that were withheld. I think you’d report that on line 16 of the new 1040, where it says “federal income tax withheld from Forms W-2 and 1099.” (You might want to double check that with a tax pro.)

If you had owed taxes on a distribution, you would have calculated that elsewhere. Since you don’t, the taxes that were withheld function like a refundable tax credit, either helping to pay other taxes you owe or increasing your refund.

Make sense?


#3

Fidelity put the 1099 in a different place than I was looking. I called them yesterday and got it figured out. Thanks for the reply though, I appreciate it.


#4

Awesome! Glad you got it resolved.