How are after-tax 401k distributions handled with your taxes

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dmertzAnswer

Level 15

Box 5 of the Form 1099-R that reports the distribution should show the after-tax amount and is the nontaxable part of the distribution. Box 2a will show the remainder of the distribution as taxable.

When you have basis in after-tax funds in a traditional 401(k) account, distributions are a proportionate mix of pre-tax and after-tax funds.

DoninGA

Level 15

Define after-tax 401(k) distributions.

A distribution from an employer sponsored 401(k) are taxable distributions. The plan administrator will normally withhold 20% of the distribution for federal taxes. The taxable amount from the distribution is entered on your tax return as ordinary income.

The Form 1099-R for distributions in 2022 will be available from the plan administrator in January 2023. You report the Form 1099-R on your tax return as received.

jlsullivAuthor

Level 2

How does the IRS know that distributions have already been taxed (after-tax distributions from 401k for example). The before tax distributions need to be taxed by IRS. But, the after-tax distributions have already been taxed.

NCperson

Level 15

@jlsulliv - the trustee has the documentation and will report it on the 1099-R..... Box 1 will be the gross distrubtion and Box 2a will be the taxable portion of the distribution. The IRS depends on the Plan Trustee for the split between pre and post tax; you just have to report it as it is reported to you.