Last year when I left my job I took my 401K money in the amount of $9850. I realize I have to pay taxes on this in the amount of $1174 (from tax table) and a penalty (I am unsure of the amount). (Is this penalty after tax?) I have listed this on my 1040A line 11a as an "IRA Distribution" (this was the closest to the 401K). Can I just claim this amount as income? Where should I put the penalty amount and would it be 10% (after tax amount)?

The taxes and penalty should be taken out of the gross amount. This is income to you but must be classified as a premature distribution for a retirment plan (i.e. 401k or IRA) and not regular income. The tax forms should walk you through the process of making sure it is included as income and the penalty is taken out.

Thanks for your reply, but I guess my question is, if the penalty is 10%, wouldn't that be after the tax is paid on the gross amount?

I am 90% sure that the 10% penalty is on the gross amount.

JeNNuss:

See my reply to your original post.

Atlanta Tax Expert