I have a tax question on a withdrawal from my 401K. I have asked the trustee of the 401K and called the IRS and have not gotten an answer that makes sense. I have always filled out my own taxes so I don't have a CPA but I may have to get one this year. I calculated my taxes as far as possible and it came out I could draw up to $22,000 from my 401K without paying any tax on my Social Security.I don't know how to ask this without giving the amounts.From my latest 401K Account Statement:Employee After-Tax $72,087.39Pre-87 After-Tax Contributions $ 4,680.00Post-87 After-Tax Contributions $ 840.00Total Non-Taxable Contributions $ 5,520.00I withdrew $22,000 from my 401K. On the statement that came with it.Value of Total Distribution $22,000.00Federal and State Taxes were withheldAfter Tax Contribution $ 4,864.09My question is if the $4,864.09 is taken off on the $22,000 Distribution, or will I only take a percentage of it off this year. If I must take it all this year then I could take more money out this year without paying tax on my SS.Thank you in advance for any help you can give me. Bill
Hi Bill. I presume you are over age 59-1/2 and therefore taking penalty free distributions.When your 401K or IRA contains both before and aftertax contributions, a portion of every distribution is considered a refund of your aftertax contribution. Check the IRS Publication on IRAs for details. There is a worksheet for this in the instructions for form 1040 I believe.So in this case $5520-4864.09 is the amount your 401K custodian calculated as the aftertax portion of your payment. The rest of it is a taxable distribution. I would think the ratio of 5520-4864.09 to $22K should be the same as the ratio of $5520 to the total value of your account on the date of distribution. If in doubt, ask your 401K custodian to provide details of the calculation.
Hi PauleckerThanks for your help.Yes, I am over age 59-1/2.I will not be able to call my 401K custodian, again, until next week. I did go to their website and get an updated copy of my account statement dated yesterday. The money was all taken from the aftertax part of the account. The question I have is while I took out about 30% ($22,000.00) of the money in the aftertax ($72,087.00), the figure they are giving on their form for After-Tax contribution ($4864.09) is 88% of my total contribution ($5520.00). When I called them yesterday they could not tell me why this amount was shown. Maybe when I call back I will get someone who can tell me more. The 1099 may be clearer when I get it, but it will be too late to take more out for this years taxes.Thanks. I will be doing some more reading this weekend.Bill
I am not sure what you mean by employee after-tax of $72,087.39. Two lines later you state the total After-tax contributions are $5,520.00. I assume you made a mistake saying the $72,087.39 is employee after-tax.Anyways, here is what I think is going on.I believe the Pre-87 after tax comes out first, then the post-87 after tax gets pro-rated with the taxable amounts. This is why it shows the after tax amount withdrawn to be the total of all of the pre-87 and part of the post-87. Of course the total distribution is not taxable, the amount given as after tax money is not.The plan information should outline the order of withdrawal and how it is determined of when and how much the after tax comes out on these partial withdrawals.
Hi buc99Thanks for your help.The $72,087.39 is the present value of the after-tax part of the 401K.This is from my contributions of $5,520.00. Comparing statements before and after the withdrawal shows money was removed from both pre 87 & post 86, with most coming out of the Pre 87. The check stub states After Tax Contribution-4,864.09What I am trying to determine is if this $4,864.09 is all used against this years withdrawal($22,000) when I fill out this years taxes. The 1099 may make this clearer but I will not receive it in time to take more out this year. When I called the 401K custodian they could not tell me why the $4,864.09 was shown on stub. He said he thought that since I drew out about 30% of the money in the aftertax part of the account, the after tax contribution should also be about 30%. It is about 88% of the money I contributed.Thanks againBill
Bill,As I said in my other post, I believe the Pre-87 after tax comes out first, before any taxable amounts. Then, the post-86 after tax gets pro-rated with the taxable monies. Thus you have all the pre-87 in your withdrawal, along with some post-86 and taxable monies. Since your stub says after tax is $4,864.09, why wouldnt you think that figure is the after tax amount? I assume that amount is not taxable, and the rest is taxable. As for the % differences, once again, the PRE-87 does not get pro-rated, IT COMES OUT FIRST.Why the person you called wouldnt know is beyond me.
Bug99,You hit the nail right on the head. I did some more reading and figuring on the statements and the IRA Pub., and what you are saying is correct. I quess I just had trouble understanding. You helped a lot.Thank You much. I don't know why the person I called couldn't help. Maybe they didn't want to get into tax questions.Thanks Again,Bill
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