When contributing to a 401(k) plan, you’ll encounter two main form options that impact your tax implications: Form 401(k) and Roth 401(k). Traditional 401(k) contributions are made on a pre-tax basis, meaning they reduce your taxable income for the year. The money you contribute grows tax-deferred, but you’ll pay taxes on withdrawals during retirement. Roth 401(k) contributions are made on an after-tax basis, so they don’t affect your current taxable income. The money grows tax-free while invested, and you won’t pay taxes on qualified withdrawals during retirement. Choosing the right form depends on your financial goals, current tax situation, and retirement income projections.
Form 1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
Form 1099-R is used to report distributions from retirement accounts such as 401(k)s, pensions, and IRAs. This form provides information about the amount of money you received from the account, as well as any taxes that were withheld.
Types of Distributions
- Early distributions are taken before you reach age 59½. These distributions are subject to a 10% penalty, in addition to any income tax you owe.
- Qualified distributions are taken after you reach age 59½. These distributions are not subject to the 10% penalty, but they may be subject to income tax.
- Required minimum distributions (RMDs) are taken after you reach age 72. These distributions are also subject to income tax.
How to Report Distributions on Your Tax Return
You will need to report the amount of your distributions on your tax return. The amount you report will depend on the type of distribution you received.
| Type of Distribution | How to Report |
|---|---|
| Early distributions | Report the amount of the distribution on line 5a of Form 1040. |
| Qualified distributions | Report the amount of the distribution on line 5b of Form 1040. |
| Required minimum distributions (RMDs) | Report the amount of the distribution on line 5d of Form 1040. |
Form W-4P: Withholding Certificate for Pension or Annuity Payments
If you are receiving pension or annuity payments, you will need to complete Form W-4P, Withholding Certificate for Pension or Annuity Payments, to let the payer know how much federal income tax to withhold from your payments.
You can choose to have federal income tax withheld from your pension or annuity payments at the same rate as your regular wages, or you can choose a different withholding rate. If you choose a different withholding rate, you will need to enter that rate on line 7 of Form W-4P.
You can also choose to have state income tax withheld from your pension or annuity payments. To do this, you will need to complete the appropriate state withholding form and submit it to the payer.
Here are some things to keep in mind when completing Form W-4P:
- You can change your withholding at any time by completing a new Form W-4P.
- If you are not sure how much federal income tax to withhold, you can use the withholding calculator on the IRS website.
- If you have multiple pensions or annuities, you will need to complete a separate Form W-4P for each one.
Form W-4P Instructions
- Enter your name and address in the top left corner of the form.
- Enter your Social Security number in the box provided.
- Check the box that corresponds to your filing status.
- Enter the number of allowances you are claiming on line 5.
- Enter an additional amount of tax to be withheld on line 6.
- Enter your signature and date in the bottom right corner of the form.
Form W-4P Worksheet
The Form W-4P worksheet can help you determine how much federal income tax to withhold from your pension or annuity payments. To use the worksheet, you will need to know your estimated taxable income for the year. You can find this information on your tax return from the previous year.
| Filing Status | Standard Deduction | Additional Standard Deduction |
|---|---|---|
| Single | $12,950 | $1,750 |
| Married Filing Jointly | $25,900 | $1,350 each |
| Married Filing Separately | $12,950 | $0 |
| Head of Household | $19,400 | $1,750 |
What Form for 401k for?
Form 8915-E: Qualified 2020 Disaster Retirement Plan Distributions and Repayments.
Use Form 8915-E to:
- Report qualified disaster retirement plan distributions you received in 2020 from an eligible retirement plan, or
- Repay a qualified disaster retirement plan distribution you received in 2020.
You can use Form 8915-E to report a qualified disaster retirement plan distribution you received in 2020 from an eligible retirement plan and to report the repayment of such a distribution that you made in 2020.
For more information about qualified disaster retirement plan distributions and repayments, see the Instructions for Form 8915-E.
| 401(k) plan | 403(b) plan | 457 plan |
| IRA |
Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
Form 5329 is used to report additional taxes on distributions from qualified retirement plans, including 401(k)s and IRAs. These taxes may apply if you withdraw money from your account before you reach age 59½, or if you take out more than the annual contribution limit.
To complete Form 5329, you will need the following information:
- Your name and address
- Your Social Security number
- The amount of the distribution
- The date of the distribution
- The type of account from which the distribution was made
- The reason for the distribution
You can find more information about Form 5329 on the IRS website.
| Type of Distribution | Additional Tax |
|---|---|
| Early withdrawal (before age 59½) | 10% |
| Excess contribution | 6% |
| Excess accumulation | 15% |
Well, there you have it! The ins and outs of choosing the right 401(k) form for your taxes. Remember, whether you go with the W-4 or W-4P, make sure you fill it out accurately to minimize surprises come tax time. Thanks for hanging out with me today. If you have any more burning tax-related questions, be sure to swing by again soon. I’ll be here, ready to dive into the nitty-gritty with you!