401 k need help

[clements-alex]

I put money from my paycheck in my 401k and is match by my company  can this be used for 401k tax credit

[MargaretL · Accepted solution]

No, 401K contributions cannot be used as a credit. But you do have a tax benefit from the contributions already listed on your W-2 form as being nontaxable. 

At this point, all you have to do is report W2 data in Turbo Tax exactly as it appears on the form. The 401(k) plan contributions you elect to make come directly out of your salary. Since the contributions are made with pre-tax dollars, your employer does not include these amounts in your taxable income for the year. At the end of the year, when you receive your W-2 form that shows your earnings, you will notice that your wages subject to federal income (box 1) tax are lower because of your 401(k) plan contributions (box 12, code D). Since the contributions are not counted in your taxable income to begin with, you do not take a deduction when you file your return.

[sdmays1]

Margaret, I am not understanding block 12b code D.  My adjusted gross income was less than 1% of 2018, taxable income was only 0.07% increase income tax was almost the same, but 12b code D value increased my total tax after credits by almost $27%, increasing my balance due by over 346%.  Is there something wrong with the program, or do I not put anything in 12b for 401k?

[BillM223]

First, the question you are responding to is more than a year old (the date is the date it was migrated to the current forum).

Second, I can't make out what you are trying to say.

Your 2019 income was 1% of your 2018 income? Please put this into numbers, like $10,000 (they don't have to be the exact numbers, just ballpark it).

Your taxable income was increased by 0.07%? How is that possible if your income was 1% of the previous year?

Your description doesn't make sense. Please repeat with something resembling real numbers.

[dmertz]

Make sure that you entered the code D amount only in box 12 of TurboTax's W-2 form, nowhere else in TurboTax.  A 401(k) is not an IRA.  Many people make the mistake of thinking that a 401(k) is an IRA that needs to be entered as an IRA contribution; it's not.

Make sure that you correctly selected code D for this entry in box 12 TurboTax's W-2 form.  There are other codes that could be mistakenly selected that can cause the associated amount to be treated as taxable income.

If you made a separate IRA contribution but your elective deferrals left you with an amount in box 1 of your W-2 to support the IRA contribution, you have an excess IRA contribution that is subject to a penalty unless the excess is corrected by a return of contribution before the due date of your tax return.