Do I Report 401(k) on Taxes? Contributions, Withdrawals, Rollovers

Do you report a 401(k) on your taxes? Contributions to a traditional or Roth 401(k) taken from your paycheck do not need separate reporting on your federal return, because your employer already reflects them on your W-2. Distributions are different: any money that leaves the account has to be reported as income on Form 1040, using the Form 1099-R your plan administrator sends you.

Why Contributions Don’t Need Separate Reporting

Traditional 401(k) contributions come out of your paycheck before federal income tax is calculated. Your employer subtracts those deferrals from the wages shown in Box 1 of your W-2 and reports the total deferral separately in Box 12 with Code D.¹ Because Box 1 already reflects the reduction, there is nothing to add or subtract on your return.² Your Social Security and Medicare wages in Boxes 3 and 5 will be higher than Box 1, because those deferrals are still subject to payroll tax.³

Roth 401(k) contributions use after-tax dollars, so your full salary stays in Box 1. The employer flags the Roth contributions in Box 12 using Code AA.⁴ The tax is already collected through payroll withholding, so again nothing extra goes on your return.

One exception can catch people off guard. Under SECURE 2.0, some plans let employer matching contributions go directly into your Roth account. Those Roth matches are not withheld through payroll. Instead, the plan administrator issues a Form 1099-R for the year the match is allocated, with Code G in Box 7, and you include that amount in taxable income even though you never touched the money.⁵

How to Report a 401(k) Distribution

Any time money leaves your 401(k), the plan administrator sends you Form 1099-R, usually by January 31 of the following year. The 1099-R tells you (and the IRS) what came out and why. The boxes that matter most:

Box 1 shows the gross distribution before any withholding.
Box 2a shows the taxable amount. For a traditional 401(k), this is usually the same as Box 1.
Box 4 shows any federal income tax the plan already withheld.
Box 7 contains a distribution code that signals the reason for the payout. Code 1 flags an early distribution with no known exception, Code 7 is a normal distribution at 59½ or later, and Code G is a direct rollover.⁶

Report the distribution on Form 1040 using lines 5a and 5b. The gross amount from Box 1 goes on line 5a, and the taxable amount from Box 2a goes on line 5b, where it flows into your adjusted gross income.⁷ If the entire distribution is taxable, as most traditional withdrawals are, you can put the full amount on line 5b and leave line 5a blank.

Federal tax withheld in Box 4 gets credited on your return the same way paycheck withholding does. Plans generally withhold 10 percent from irregular distributions by default, though you can adjust that on Form W-4R. For an eligible rollover distribution paid to you rather than transferred directly, the withholding rate is a mandatory 20 percent.⁸

Roth 401(k) Distributions

Qualified Roth 401(k) distributions come out tax-free, including the earnings, if you are at least 59½ (or the distribution is due to disability or death) and at least five taxable years have passed since your first Roth contribution to that plan.⁹ If both conditions aren’t met, the earnings portion is taxable. Either way, the numbers still get reported on lines 5a and 5b based on what Box 2a shows.

Reporting Rollovers Even When No Tax Is Due

Rollovers do not create tax, but they still get reported. In a direct rollover, the plan sends funds straight to another qualified plan or IRA. Nothing is withheld, and Box 7 shows Code G.⁶ Put the gross amount on line 5a, enter $0 on line 5b, and check the rollover box on line 5c.⁷

With an indirect rollover, you receive the distribution yourself and have 60 days to deposit it into another eligible retirement account.¹⁰ The plan is required to withhold 20 percent of the taxable amount, so to roll over the full balance you’d need to make up the withheld portion from other funds within the 60-day window. Anything not redeposited becomes taxable income for the year. Reporting is the same as a direct rollover: full amount on line 5a, taxable portion (if any) on line 5b, rollover box checked on line 5c.

Early Withdrawals and the 10 Percent Penalty

Money taken from a traditional 401(k) before age 59½ generally triggers a 10 percent additional tax on top of regular income tax.¹¹ When Box 7 shows Code 1, you report the penalty on Schedule 2 (Form 1040) and check the box indicating you do not need to file Form 5329.¹²

If you qualify for an exception but the 1099-R doesn’t reflect it, file Form 5329 to claim the exception. Exceptions include separating from service at 55 or older, unreimbursed medical expenses above 7.5 percent of your AGI, up to $5,000 for a qualified birth or adoption, up to $22,000 for a federally declared disaster, up to $10,000 (or 50 percent of the balance, whichever is less) for a domestic abuse victim, and one emergency personal expense withdrawal per year of up to $1,000. The birth or adoption, disaster, domestic abuse, and emergency expense exceptions apply to distributions made after December 31, 2023.¹¹

Required Minimum Distributions

Once you reach age 73, you generally have to start taking annual withdrawals from a traditional 401(k). The first RMD is due by April 1 of the year after you turn 73. Some plans let you delay if you are still working for the sponsoring employer.¹³ Under SECURE 2.0, the starting age moves to 75 beginning in 2033. RMDs are reported on lines 5a and 5b like any other distribution.

Miss the deadline and the IRS charges an excise tax of 25 percent on the shortfall, dropping to 10 percent if you correct it within two years. The penalty is reported on Form 5329.¹⁴¹⁵

Excess Contributions

If you defer more than the annual limit across employers, the excess has to be removed by April 15 of the following year. That date is fixed and doesn’t move if you file an extension.¹⁶ The plan returns the excess plus earnings and issues a 1099-R with Code 8 (taxable in the current year) or Code P (taxable in the prior year).⁶ Include the returned amount in income for the year the code points to. Miss the April 15 deadline and the excess can end up taxed twice: once in the year of deferral and again when eventually distributed.

Loan Offsets

Borrowing from your 401(k) is not itself a taxable event. But if you leave your job with an outstanding loan and can’t repay it, the unpaid balance is typically offset against your account and treated as a distribution, with a 1099-R to match.¹⁷ When the offset happens because you separated from employment, it’s a Qualified Plan Loan Offset and Box 7 shows Code M. A QPLO gives you until the due date of your tax return (including extensions) for the year of the offset to roll the amount into another qualified plan or IRA, instead of the standard 60 days. If you don’t roll it, the full offset amount is taxable income and, if you’re under 59½, may bring the 10 percent penalty.

State Tax Treatment

Federal reporting is only part of the picture. States handle 401(k) distributions differently: some don’t tax retirement income at all, others tax it at rates that can exceed 13 percent, and several offer partial exemptions based on age or income. Check your state tax authority for the rules that apply to your situation.

1
Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026)
2
Internal Revenue Service. Publication 525 (2024), Taxable and Nontaxable Income
3
Internal Revenue Service. 401(k) Plan Overview
4
Internal Revenue Service. Roth Account in Your Retirement Plan
5
Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2
6
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
7
Internal Revenue Service. Instructions for Form 1040 and 1040-SR
8
Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans
9
eCFR. 26 CFR 1.402A-1 – Designated Roth Accounts
10
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
11
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
12
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
13
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
14
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
15
Internal Revenue Service. Reporting IRA and Retirement Plan Transactions
16
Internal Revenue Service. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits
17
Internal Revenue Service. Plan Loan Offsets