A withdrawal from a 401(k) account is entered on your tax return as ordinary income and taxed at your current tax rate. Any taxes withheld from the withdrawal are entered on your tax return as a tax payment (just like from a W-2). If your total tax payments are greater than your total tax liabilities then you will receive a tax refund for the overpayment. If your total tax payments are less than your total tax liabilities then you will have taxes owed.
You will receive a Form 1099-R in January of the year following the withdrawal from the plan administrator.
To enter a form 1099-R -
- Click on Federal Taxes (Personal using Home and Business)
- Click on Wages and Income (Personal Income using Home and Business)
- Click on I'll choose what I work on (if shown)
- Scroll down to Retirement Plans and Social Security
- On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button
Or enter 1099-r in the Search/Find box located in the upper right of the program screen. Click on Jump to 1099-R
