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Closed 401K

I am 77 years old and I closed my 401K. The money from the 401K I gave to my grandchildren for education. Must I pay tax on what I took out?

2 Replies
Level 15

Closed 401K

Yes.  You will receive a 1099R for the money you took out of the 401k which must be entered on your tax return.  That you gave it as gifts to your grandchildren is not relevant.   Gifts to individuals are not deductible.  

 

 

 

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Level 15

Closed 401K

You will receive a Form 1099-R from the 401(k) plan administrator during the month of January.  You enter the Form 1099-R on your federal tax return as received.   The taxable amount of the withdrawal is entered on your tax return as ordinary income.  Any federal taxes withheld from the withdrawal is entered on your tax return as a tax payment.  If your total tax payments on your tax return are greater than your total tax liability then you will receive a tax refund for the overpayment.  If the total tax payments are less than your total tax liability you will have taxes owed.

 

To enter, edit or delete 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 box located in the upper right of the program screen. Click on Jump to 1099-R

 

For the gifts given -

If the amount of the gift given to any one individual is over $15,000 then you will be required to file an IRS Form 709 to report the gift given.  There will not be any taxes owed on the gift as long as your total of all gifts ever given is less than $11.4 million.

TurobTax does not support Form 709

IRS website for Form 709 - https://www.irs.gov/forms-pubs/about-form-709