Ask The Taxgirl: 401(k) Plans & Your Tax Return

Taxpayer asks:

Never had a 401k before so I have to ask. If all I did was put money in, didn’t take any out. Do I have to file a 1099 with my 1040or can I just file regularly with the 1040ez I do normally? I only put in about 605.00. I file single and rent so don’t have much but payroll to file.

Taxgirl says:

Nope, you don’t need to file your tax return with a form 1099 under those circumstances: you can go right ahead and file how you would file if you didn’t have a 401(k). In fact, if all you did was make contributions to your 401(k) through your employment, you won’t even be getting a form 1099 related to your 401(k).

A 401(k) plan is a tax-deferred retirement plan. It is pretax which means that you don’t pay federal income taxes on the amounts that you contribute. In most cases, those contributions won’t show up on your form W-2 at box 1. I say “most cases” because the amount that you can contribute on a tax-deferred basis is limited by law. Chances are you aren’t putting enough away to make a difference. For 2011, you generally can’t defer tax on more than a total of $16,500 of contributions to 401(k), Thrift Savings Plan (for federal employees), and salary reduction simplified employee pension plans (SARSEP).

The amount that you defer are, however, included as wages subject to social security, Medicare, and federal unemployment taxes. That’s why the amounts in boxes 3 and 5 won’t be the same as the amount in box 1. The amounts subject to tax for state and local purposes may also include your tax-deferred amounts.

This, of course, refers to contributions and not withdrawals. More on the consequences of those in a future post…