Thank you for the reply. I have a Roth 401K so taxes are paid upfront. What I'm trying to find out is if taxes will be paid on the principal of $1000 or earnings as well. For a Traditional 401K, I agree with you. I did a bit more digging. According to the IRS, it looks like I can have the funds removed and pay a 10% penalty: <a rel="nofollow" target="_blank" href="
https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-exceeded-code-402g-li...>
