Taxes with 401k withdraw

Forum|Forum|6 years ago
July 8, 2020
5 replies
34 views

I am trying to do taxes on turbo tax deluxe. We pulled the 401 k as a down payment on our first home. When we pulled the money the bank told us there is no penalty when it comes time for our taxes because we are using it as a down payment on our first home. The 1099R we received shows code 1 In box 7 which is early withdraw. Is there a way on turbo tax to counter act the code 1 because we used it as a down payment? with only the code 1 in there it is charging me additional tax that I was told I shouldn't have to pay.

VolvoGirl

Level 15

Sorry the bank told you wrong. Only IRA Distributions for a house are an exception to the 10% Early Withdrawal Penalty. Not 401K.

macuser_22

Alumni - Champ

The bank told you wrong. The first home exemption ONLY applies to IRA's, not 401(k) plans.

401(k) plans are employer plans administrated by the employer of employers trustee, not usually a bank. Are you sure that it is a 401(k) plan? You usually cannot withdraw from a 401(k) plan until you retire or apply for a hardship withdrawal.

Is the IRA/SEP/SIMPLE box on your 1099-R checked?

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

dmertz

Level 15

Are you sure that this is a 401(k)? It's a bit unusual for a 401(k) trustee to be a bank. Follow macuser_22's suggestion to look at the Form 1099-R provided by the payer to see if the IRA/SEP/SIMPLE box is marked. If the IRA/SEP/SIMPLE box is marked, it's an IRA, not a 401(k).