[hg71408]

Need help with filing 2010 taxes. Took an early withdrawal from my 401K plan for down payment on a primary residence. The 1099-R that was sent to me did not withhold the state and local taxes. Can I recompute the state and local taxes and include in the schedule A itemization for my 1040 long form filing along with the amount that was withheld on my W-2. Need help fast!! Much appreciative for any guidance.

[ebaines]

State/local income taxes and the 10% early withdrawal penalty are not withheld from 401(k) plan distributions. So no - there is no aditional deduction to add to your schedule A for that. Don't forget to include the 10% early withdrawal penalty on line 58 of form 1040 ("Additional tax on IRAs, other quilified retirement plans, etc.")

[hg71408]

I am not sure you understood the question... since the withdrawal will be included in my state and local tax filing, I will be paying State and Local taxes on this amount. If I will be paying state and local taxes, the question is can I include this amount on my Schedule A itemization to reduce my adjusted gross income?

[ebaines]

OK - now I see. For your 2010 return you can deduct all the state and local income taxes that you actually paid in 2010. Since there was no state/local income tax withholding from your 401(k) distribution in 2010, there's nothing to deduct for state income taxes on that distribution. Next year, when you file your 2011 federal return, you will be able to deduct whatever amount of state/local income tax you had to pay in 2011, including whatever you may owe for the 401(k) withdrawal that you took in 2010. Hope this helps.

[hg71408]

Thanks Mr. Ebaines, you are truly a subject matter expert.. thanks for your help.