# Where to pay a 401K Penalty on Taxes **URL:** \ **Category:** Factual Questions\ **Created:** [February 5, 2004, 6:15am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632 "2004-02-05T06:15:34Z")\ **Posts on this page:** 9\ **Page:** 1
**Author:** ![Markxxx](https://avatars.discourse-cdn.com/v4/letter/m/5daacb/32.png) [@Markxxx](https://boards.straightdope.com/u/Markxxx)\ **Post date:** [February 5, 2004, 6:15am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/1 "2004-02-05T06:15:34Z")
Seemingly simple question I can’t find out. I had a small amount in my 401k. I was laid off and took the money. It was around 500.00. They sent me a check for 400.00. Which as I recall is the standard 20% taken out for taxes. Now I know I have to pay a 10% penalty for early withdrawl. Where do I report this on my taxes? I tried to email the IRS and they came back with “they take out penalty and taxes when they cut the check.” This is not the case someone isn’t telling me correctly. I usually file 1040EZ cause I am a single male with no deductions. So where on what form do I find the place to report the penalty. ---
**Author:** ![z28in813](https://avatars.discourse-cdn.com/v4/letter/z/a587f6/32.png) [@z28in813](https://boards.straightdope.com/u/z28in813)\ **Post date:** [February 5, 2004, 7:23am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/2 "2004-02-05T07:23:20Z")
I actually just did the same thing when I left my last job. What happens is they tax you when you have the check sent. Why you lost $100.00 or so. And then on your taxes you have to report it as another source of income. You should receive a form in the mail that has all the information that you will need to enter into your taxes. This form comes from the parent company that held your 401k. If I remember correctly the 1040ez has a spot for “other income”. And if I am not mistaken that is where you have to enter it. I haven’t received all my w-4’s yet this year so I haven’t filled my taxes out yet. But I did receive the from from Scudder that held my cashed out 401k. You may want to contact the investment company and have them send the earning form to you if you have not received it yet. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [February 5, 2004, 7:27am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/3 "2004-02-05T07:27:45Z")
> [@](#): > > **Special Additional Taxes** > > To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in reasonable amounts over your life expectancy. These special additional taxes are the taxes on: > > ``` > * Early distributions, and > * Excess accumulation (not receiving minimum distributions). > > ``` > > These taxes are discussed in the following sections. > > If you must pay either of these taxes, report them on **Form 5329**. However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099–R correctly shows a “1” in box 7. Instead, enter 10% of the taxable part of the distribution on line 57 of Form 1040 and write “No” under the heading “Other Taxes”to the left of line 57. > > Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040. This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099–R does not indicate an exception. Source: [http://www.irs.gov/publications/p575/ar02.html](http://www.irs.gov/publications/p575/ar02.html) ---
**Author:** ![Markxxx](https://avatars.discourse-cdn.com/v4/letter/m/5daacb/32.png) [@Markxxx](https://boards.straightdope.com/u/Markxxx)\ **Post date:** [February 5, 2004, 11:07pm UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/4 "2004-02-05T23:07:49Z")
> [@z28in813](#): > > I actually just did the same thing when I left my last job. What happens is they tax you when you have the check sent. Why you lost $100.00 or so. And then on your taxes you have to report it as another source of income. You should receive a form in the mail that has all the information that you will need to enter into your taxes. This form comes from the parent company that held your 401k. If I remember correctly the 1040ez has a spot for “other income”. And if I am not mistaken that is where you have to enter it. I haven’t received all my w-4’s yet this year so I haven’t filled my taxes out yet. But I did receive the from from Scudder that held my cashed out 401k. You may want to contact the investment company and have them send the earning form to you if you have not received it yet. I don’t think I was quite clear. I had 1,000.00. I got 20% withheld when the check was cut. That gave me a check for $800.00. I STILL owe for the 10% penalty. This would be another 100.00 plus any additional tax if I fall above a 20% tax bracket. Where is the place for the 10% penalty. I need to pay that. I guess that is what I don’t see. They didn’t take that out, so I have to pay it. I did’t get any forms. Maybe it’ll be clear if I ever get these. ---
**Author:** ![z28in813](https://avatars.discourse-cdn.com/v4/letter/z/a587f6/32.png) [@z28in813](https://boards.straightdope.com/u/z28in813)\ **Post date:** [February 6, 2004, 12:10am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/5 "2004-02-06T00:10:31Z")
With mine the investment company took all penalty taxes. All 30% and then with the residual that is what I received a check for. So there are no more “penalties” I have to pay unless when I add it to my total income for the year on my taxes it brings me into the next tax bracket. Which hopefully it will not. 😕 The best thing I can recommend would be to call the 401k holding company and have them walk you through everything. They generally know what they are talking about and can advise you of any further penalties or how to go about fitting this into your taxes for the year. ---
**Author:** ![Lsura](https://avatars.discourse-cdn.com/v4/letter/l/7993a0/32.png) [@Lsura](https://boards.straightdope.com/u/Lsura)\ **Post date:** [February 6, 2004, 1:04am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/6 "2004-02-06T01:04:05Z")
Ok, my taxes from last year happen to be sitting in front of me (I needed them for this year). I reported my early withdrawel from a 401k plan on line 16 of form 1040, the Pensions and Annuities line. There is also a page number - I remember referring to that very closely when I was working with it. It should be somewhere in the “income” section of the 1040EZ. Just to check, I went over to [irs.gov](http://irs.gov) and found the instructions for form 1040EZ 2003. Looking at the chart on page 11 in [the instructions](http://www.irs.gov/pub/irs-pdf/i1040ez.pdf) (pdf file), it looks as if you may need to file either 1040 instead of 1040EZ (if you’re not itemizing, these are no tougher than a 1040EZ). That I got from [here](http://www.irs.gov/taxtopics/tc558.html). Oh, IANA accountant. ---
**Author:** ![drpepper](https://avatars.discourse-cdn.com/v4/letter/d/8baadc/32.png) [@drpepper](https://boards.straightdope.com/u/drpepper)\ **Post date:** [February 6, 2004, 3:48am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/7 "2004-02-06T03:48:58Z")
The straight dope answer to your question is that the penalty for your distribution is “tallied” (ok, paid, if you wish) on your 1040 tax return. You can not file the EZ for this reason. Lsura is correct is that the distribution amount goes on the Pensions/Annuities line (the INCOME, that is. Meaning, the total $1000 that was cased out). Then, on that same return, you are taxed two ways: Regular income tax is calculated on the $1000, AND, a 10% penalty is separately calculated and goes on its own line on page two of the tax return (sorry, don’t have the form in front of me, but take a look at page two, you’ll see what I mean). And just to further clarify, it is misleading to think that “the investment company took all the taxes, I don’t have to pay them again”. _All the investment company did was WITHHOLD some to go toward your tax bill at the end of the year_, just like withholding from your paychecks goes toward your tax bill at the end of the year. On your tax return you still MUST REPORT the distribution, calclulate the penalty, and all of this is part of the whole schmeer of taxes you’re paying on your other income. Then you include your withholding from the distribution as part of your other withholding that gets thrown on your tax return. So the bottom line answer to the OP is: The penalty gets “paid” on your tax return that you file. ---
**Author:** ![drpepper](https://avatars.discourse-cdn.com/v4/letter/d/8baadc/32.png) [@drpepper](https://boards.straightdope.com/u/drpepper)\ **Post date:** [February 6, 2004, 4:28am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/8 "2004-02-06T04:28:05Z")
Just took a look at the form… the penalty tax is put on Line 57 of the 1040. Hope this helps. ---
**Author:** ![Markxxx](https://avatars.discourse-cdn.com/v4/letter/m/5daacb/32.png) [@Markxxx](https://boards.straightdope.com/u/Markxxx)\ **Post date:** [February 11, 2004, 12:27am UTC](https://boards.straightdope.com/t/where-to-pay-a-401k-penalty-on-taxes/227632/9 "2004-02-11T00:27:04Z")
Thanks everyone 🙂