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Author: MargaretGrace Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25318  
Subject: Re: Why is my 401k being taxed? Date: 4/19/1999 11:03 AM
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tonyw44 said:

<<That doesn't make any sense. One of the really cool things about a 401k is that it's all tax deferred. So I don't know why you'd have to pay taxes on the dividends in there.>>

At my company, dividends on company stock held in our 401(k) are treated like this: I get a 1099 for the amount of the dividends, which I have to report, BUT then my W-2 income is reduced by the same amount. The net result to me is a wash, so I'm not really paying income tax on the dividends (although it certainly feels that way when you see that 1099 in the mailbox!). I'm told the corporation gets some sort of tax benefit from this move, although I'm not sure exactly how.

MargaretGrace
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