How to Report a 401k Withdrawal on Your Tax Return

To report a 401(k) withdrawal on your tax return, take the numbers from the Form 1099-R your plan administrator sends you by January 31 and enter them on Lines 5a, 5b, and 25b of Form 1040. If the withdrawal happened before you turned 59½, you’ll usually add a 10% additional tax through Schedule 2 or claim an exception on Form 5329. A direct rollover uses the same lines but with zero on the taxable line and the rollover box checked. Everything else is a variation on those steps.

Start With the 1099-R

The 1099-R is the document the IRS matches against your return, so the numbers on your 1040 have to line up with what your plan administrator reported. Four boxes do the work:

  • Box 1 is the gross distribution, meaning the full amount that left your account before any withholding.
  • Box 2a is the taxable portion. For a traditional 401(k) funded entirely with pre-tax dollars, this almost always matches Box 1.
  • Box 4 is the federal income tax already withheld and sent to the IRS on your behalf. It counts as a prepayment when you file.
  • Box 7 is the distribution code. A one- or two-character code that tells the IRS why the money came out and whether a penalty applies.

The Box 7 code matters most. Code 1 flags an early distribution before 59½ and generally triggers the 10% additional tax. Code 7 is a normal distribution, typically because you were over 59½ or separated from service after 55. Code G marks a direct rollover to another qualified plan or IRA and produces no tax. Code B applies to a designated Roth 401(k) distribution. Code M appears on a qualified plan loan offset, discussed below.1Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498

If Box 2b is checked (“Taxable amount not determined”), the administrator didn’t calculate the taxable share. That’s unusual for a traditional 401(k) funded only with pre-tax contributions but can happen if the account held after-tax money. In that case you’ll need to figure the taxable portion yourself.

Putting the Numbers on Form 1040

The 2025 Form 1040 (the return you file in 2026) uses Lines 5a and 5b for pensions and annuities, which is where 401(k) distributions belong.2Internal Revenue Service. 1040 (2025) Instructions

  • Line 5a: gross distribution from Box 1 of the 1099-R.
  • Line 5b: taxable amount from Box 2a. For most traditional 401(k) withdrawals, this equals Line 5a because the whole distribution is taxable.
  • Line 25b: federal income tax withheld from Box 4. It gets added to withholding from your W-2 and other 1099s to offset your total tax bill.

If Box 2a is blank and the account held only pre-tax contributions, enter the full Box 1 amount on Line 5b. The IRS treats the entire distribution as taxable unless you can show an after-tax basis. When more than one 1099-R arrives for the same year, add the amounts together on each line. If you’re filing on paper, attach a copy of each 1099-R; e-file software pulls the same numbers from its 1099-R data entry screen.

Whatever lands on Line 5b flows into your adjusted gross income. That can push you into a higher bracket, shrink credits tied to income, and change other calculations further down the return.

Reporting a Rollover

A rollover keeps the money in a tax-deferred account, so it isn’t taxable, but you still have to report it correctly or the IRS will assume the full distribution was taxable income.

Direct Rollover

In a direct rollover the money goes straight from the 401(k) to another employer plan or an IRA. The 1099-R shows the full amount in Box 1 and Code G in Box 7, and no mandatory 20% withholding applies because you never received the funds.3Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions

On the 1040, enter the Box 1 amount on Line 5a, enter zero on Line 5b, and write “Rollover” next to Line 5b (or check the appropriate rollover indicator in your software).2Internal Revenue Service. 1040 (2025) Instructions

60-Day Indirect Rollover

An indirect rollover is messier. You receive the funds personally, the plan withholds 20% for federal tax, and you have 60 days to deposit the full original amount into a qualified plan or IRA. To roll over the entire distribution, you have to replace the withheld 20% out of pocket. If you only redeposit the 80% you actually received, the withheld portion becomes a taxable distribution and may face the 10% early withdrawal penalty.4eCFR. 26 CFR 31.3405(c)-1 – Withholding on Eligible Rollover Distributions

If you completed a full 100% rollover within 60 days, report the gross amount on Line 5a, enter zero on Line 5b, and label it as a rollover. The 20% withheld still shows up on Line 25b as a credit, which usually comes back as a refund. The one-rollover-per-year rule that applies to IRA-to-IRA rollovers does not apply to rollovers from an employer plan like a 401(k).3Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions

Roth 401(k) Distributions

Distributions from a designated Roth 401(k) are tax-free if they qualify. Qualified means the account has been open at least five tax years since your first Roth contribution and you’re at least 59½, disabled, or deceased.5Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts The 1099-R shows the gross amount in Box 1, zero in Box 2a, and Code B in Box 7. Report Box 1 on Line 5a and zero on Line 5b. If the distribution is non-qualified, your contributions still come out tax-free, but the earnings portion is taxable and may trigger the 10% penalty.

The 10% Early Withdrawal Penalty

Withdrawing before age 59½ generally adds a 10% additional tax on the taxable portion of the distribution, on top of ordinary income tax.6Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts Code 1 in Box 7 signals that the penalty applies.

There are two paths, and picking the right one matters:

On Form 5329, Part I, you enter the total early distribution, subtract the amount covered by the exception using its numbered code, and apply the 10% rate to whatever remains. That’s the only way to formally tell the IRS the withdrawal is partially or fully penalty-free.

Exceptions Most Likely to Apply

Some of the more common exceptions used on 401(k) distributions:9Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions

  • Separation from service during or after the year you turn 55 (age 50 for qualified public safety employees), for that employer’s plan.
  • Total and permanent disability, certified by a physician.
  • Distributions to a beneficiary or estate after the account holder’s death.
  • Substantially equal periodic payments over your life expectancy, continued at least five years or until 59½, whichever is later.
  • Unreimbursed medical expenses above 7.5% of AGI.
  • Payments to an ex-spouse or dependent under a QDRO.
  • IRS levy on the plan.
  • Qualified reservist distributions during a call to active duty of at least 180 days.
  • Birth or adoption, up to $5,000 per child within one year.

SECURE 2.0 added several more exceptions for distributions after December 31, 2023: terminal illness (physician-certified life expectancy of 84 months or less), domestic abuse victim (up to the lesser of $10,000, indexed, or 50% of the account), emergency personal expense (one withdrawal per year up to $1,000), and federally declared disaster (up to $22,000, with the option to spread the income over three years or repay).10Internal Revenue Service. Retirement Plans and IRAs Under the SECURE 2.0 Act of 2022 Not every plan has adopted every SECURE 2.0 option since some are optional for employers, but the exception is claimed on your return through Form 5329 regardless of what the plan offers.

Required Minimum Distributions

Starting at age 73, you have to take required minimum distributions from your traditional 401(k) each year.11Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs The first RMD is due by April 1 of the year after you turn 73; every one after that is due December 31. Delaying the first one to April means taking two distributions in the same calendar year, which can inflate that year’s taxable income.

If you’re still working for the employer sponsoring the 401(k) and don’t own more than 5% of the company, you can postpone RMDs from that specific plan until you actually retire. That “still working” delay doesn’t apply to former employers’ plans or to IRAs.

RMDs are reported the same way as any other taxable distribution: Line 5a for gross, Line 5b for taxable. Miss one, and the excise tax is 25% of the shortfall, dropping to 10% if you correct it within two years by withdrawing the missed amount and filing an amended Form 5329. Roth 401(k) accounts are currently subject to RMDs, though rolling into a Roth IRA before your RMD start date removes the requirement.

Special Situations

Defaulted 401(k) Loans

If you took a 401(k) loan and defaulted or left your employer with a balance outstanding, the unpaid amount becomes a taxable plan loan offset reported on a 1099-R. When the offset happens because of separation from service or plan termination, Code M appears in Box 7 and you have until your tax filing deadline (including extensions) to roll that amount into an IRA or another plan to avoid tax.12Internal Revenue Service. Plan Loan Offsets Otherwise it’s fully taxable and can trigger the 10% penalty if you’re under 59½.

Hardship Withdrawals

Hardship withdrawals are fully taxable and cannot be rolled over. If you’re under 59½, the 10% penalty still applies unless you separately qualify for one of the exceptions above; the hardship itself is not a penalty exception. Default withholding on a hardship distribution is 10% rather than the 20% mandatory rate used for rollover-eligible distributions.

Net Unrealized Appreciation on Employer Stock

If your 401(k) held company stock and you took a lump-sum distribution of the entire balance in one tax year, the net unrealized appreciation (NUA) strategy may cut the tax bill. Box 6 of the 1099-R shows the NUA. You pay ordinary income tax only on the cost basis of the stock when it was contributed; the appreciation above that basis is taxed at long-term capital gains rates when you sell, regardless of your personal holding period.

If Your 1099-R Is Wrong or Missing

If the amounts on the 1099-R don’t match your records, contact the plan administrator and ask for a corrected form (it will be marked “CORRECTED”). Start early. Corrections can take weeks.

If the administrator won’t issue one, or a 1099-R never arrives at all, file Form 4852 as a substitute. The IRS asks that you call 800-829-1040 first if the form still hasn’t arrived by the end of February.13Internal Revenue Service. Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R Use your best records to estimate the distribution, taxable amount, and withholding on Form 4852. If the real 1099-R shows different numbers later, file Form 1040-X to correct the return, and keep every account statement and piece of correspondence you used to build the original estimate.

One boundary worth flagging: 401(k) distributions don’t get reported anywhere on the wage side of your return. They aren’t subject to Social Security or Medicare payroll taxes because those apply only to wages and self-employment income. State treatment varies, so the federal steps above don’t finish the job in every state.