In 2017 I cashed out a previous employer's 401k for $969, but I reported all of this on my 2017 tax return. Do I need to report it again, here?

[laynedollar]

The TurboTax online system asked "Did you receive any distributions from a retirement plan after 2015?" When I choose "yes," it specifies "We're only talking about distributions that occurred before the due date (including extensions) of your 2018 return."

Well, this seems like it would include the Fall 2017 disbursement ($969) I received (cashing out a previous employer's 401k), BUT I already reported this on my 2017 tax filings. Should I say "no" here and move on?

[DoninGA]

Say No.

[laynedollar]

Do you know why they're asking about something that would obviously be reported as income for the year it was received?

[dmertz · Accepted solution]

Yes, you must enter the $969 2017 distribution.  You'll need to do the same on your 2019 tax return.  TurboTax is asking in regard to the Retirement Savings Contributions Credit where amounts received from retirement accounts in the current tax year and the two prior years reduce the amount of current year contributions that are considered for the credit.  This is because the lawmakers did not want you to be able to use a retirement distribution to make a new contribution and get the credit while not actually increasing your retirement savings.

[laynedollar]

Thanks for this response! I may be starting to actually underdtand, but maybe you can help some more. It would be forever appreciative. Ok, so from Nov2014 to Aug 2017 I worked for a company, we'll call it RCI, but only participated in their 401k during the last 10 months or so I was there (around Nov2016 to when I left in Aug2017.) I then started employment with another school,  a State University, in Aug2017 and almost immediately began contributing to their "Teacher's Retirement System," and I still am every pay period (pre-tax.) In Oct2017 (I believe) I completely closed the RCI 401k, opting for the full disbursement and fees, just to make rent that month. I reported this on my 2017 tax return. Does this new info change anything?

[dmertz]

No, it confirms my answer.  The amount of retirement savings on which your 2018 Retirement Savings Contributions Credit will be calculated is the amount of you 2018 contributions to the Teachers Retirement System minus $969.  Since only first $2,000 of your net retirement contributions are considered for the credit, if you contributed $2,969 or more for 2018, subtracting $969 will not affect your credit.  The same will be true for your 2019 tax return.

[laynedollar]

Thanks again, and thanks for suffering through my ignorance (your're a true hero.) The online step-by-step tool says I *don't* qualify for the "Saver's Credit" without asking me much of anything (except I did input the $969 disbursement for 2017.) Sorry to beat a dead horse (my apologies, really)... but in Fall2017, rather than rolling over the funds or keeping them where they were when I changed jobs, I completely terminated the 401k plan with my old employer and opted to take the accumulated amount, minus fees. I paid an additional tax at year's end on that $969.
At my new employer, I completely started over with this new retirement plan (Techer's) and have contributed to it (pre-tax) every pay period since ($1500.30 total in 2018.) Should I just accept the fact that I won't get the "Saver's Credit" and move on?
Thanks again for your time, @dmertz!

[dmertz]

Apparently your 2018 AGI is too high to qualify for any Retirement Savings Contributions Credit or your 2018 income tax liability is already zero without the credit.

Just make sure that you have entered in box 12 of TurboTax's W-2 form all of the box 12 entries shown on the W-2 provided by your employer.

[laynedollar]

Thanks again, have a blessed tax season and year ahead, kind stranger.