Question

My job went bankruptcy and I was 55 years old and I took money out of my 401k. Where do I report it on my taxes to avoid the penalty

Forum|Forum|2 years ago
February 21, 2024
3 replies
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TurboTax Deluxe Online

Employee

If the funds from the 401(k) were distributed in 2023 then you should have received a Form 1099-R with a code of 2 in box 7 of the form.

To enter, edit or delete a form 1099-R -

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

Or enter 1099-r in the Search box located in the upper right of the program screen. Click on Jump to 1099-R

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LibbyleeAuthor

I redrew the money from the former employee (that went bankrupt) and placed it with a new financial institution then I redrew money from it a few months later to live until I found another job!

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Opus 17

Employee

@Libbylee wrote:

I redrew the money from the former employee (that went bankrupt) and placed it with a new financial institution then I redrew money from it a few months later to live until I found another job!

I think you screwed up.

If what you are saying is, you:

#1 rolled over the 401k to an IRA at your own broker of choice, and then

#2 withdrew money to live on from the IRA

then you lost the 10% penalty exception. The age limit for an IRA is 59-1/2. The age limit for a 401k is also 59-1/2, or 55 if you are 55 or older when you leave the company. But that only applies to the 401k. Once you move the money to the IRA, you lose the protection of that special rule.