[Polosport44]

How do I file early withdrawn 401k funds on tax return?

[ebaines]

Your plan administrator will send you a 1099-R form in January, showing amounts you must report on your 1040 for both income received and taxes withheld. You show the income on line 16 of your 1040, and the 10% penalty on line 60. I assume here that you are under 59-1/2 years of age, and so the withdrawal is subject to the 10% penalty.

[AtlantaTaxExpert]

PoloSport44:

Is it too late to return the money? If not, do so IMMEDIATELY, then see about BORROWING it from the 401K. You avoid the tax and 10% Early Withdrawal Penalty (which, combined, can hit 50%, but will be at least 30% if you are in a state that charges income taxes) and you are paying yourself when you pay the loan back.

Another option is to roll the down payment into a rollover IRA, then make the withdrawal from the IRA. You can withdraw funds (up to $10,000) from a traditional/rollover IRA for a home purchase if you qualify as a first-time home buyer and thus AVOID the 10% Early withdrawal Penalty, though you WILL still pay state and federal income taxes on the withdrawal.

The loan option is, however, the best way to go In my opinion.