[Raggle]

Where on your taxes do you put the 401k money? They talk about a 10% penalty, where does that occur?:confused:

[ebaines]

Your plan administrator will send you a 1099-R form at the end of the year that reports the amount of withdrawal from your 401(k) and the amount of tax withheld. You enter the amount of the withdrawal on line 16 (“Pensions and Annuities”), or line 12 of Form 1040A. If any part of the withdrawal is due to after-tax money that you invested, this will reduce the taxable portion.

You report the 10% penalty on line 60 of your form 1040 (“Additional tax on IRAs, other qualified retirement plans, etc.). You must file form 1040 if a penalty is due.

You show taxes already withheld on line 64 (“Federal income tax withheld from Forms W-2 and 1099”).

Form 5329 may also be required, for example if you claim an exemption from the early withdrawal penalty.

[SusanYeattsCFP]

You can also ask the administrator of your 401k to withhold the 10% penalty if they do not do so automatically. Also the penalty may not be the only tax you pay on the withdrawal. You are wise to seek counsel of a qualified tax adviser in your area BEFORE taking the withdrawal to see if you may have other options that will reduce the tax burden of accessing your money. A tax professional may also be able to help you estimate the full amount of the tax that you may owe so that you can send in an estimated payment or place the funds in a safe account until it is time to pay the tax bill in order to reduce the odds of your having interest and penalties added to your tax bill later on!