Income from pensions and annuities are fully taxable under Internal Revenue Service guidelines if the taxpayer did not contribute to the accounts. At the end of the tax year, each taxpayer who received income from a retirement account, including a 401k should receive an information form, specifically federal Form 1099-R for reporting purposes. Taxpayers should include this income on their federal income tax return when appropriate. However, should the taxpayer forget to file information on a 401k, he may file an amended return.
The IRS stipulates that taxpayers who file returns that omit income should file again. Since failure to report 401k distributions involves incorrectly reporting income, the taxpayer should immediately file a corrected return when he discovers an error. The federal amended tax return, Form 1040X, is used to correct mistakes and oversights from prior year tax returns and, according to IRS guidelines, the corrected return must be completed within three years of the incorrect return. Additionally, the IRS requires that the taxpayer file a separate return for each year the information needs correcting. For example, should the taxpayer have forgotten to file information on a 401k account for three prior tax years, he should file three separate 1040X forms. It should also be noted that an amended federal return may change the taxpayer's state income tax liability and the IRS recommends he contact the appropriate state agency to see what procedure to follow for correcting prior state returns.
Amended returns can correct information originally filed on federal forms 1040, 1040A and 1040EZ, whether the original was filed electronically or in paper form. However, the IRS does not accept amended returns electronically. All corrections must be completed on paper forms. Pertinent schedules, information forms and all other paperwork that should have been filed with the original form that verifies the changes made on an amended return should be attached and forwarded to the Internal Revenue Service along with Form 1040X. For 401k income, this would be the 1099-R.
If income from a 401k was included on the income tax return, but the 1099-R form, which the account administrators mail to recipients, was not sent to the IRS along with the tax return, it generally does not require filing an amended return. If the IRS wants a copy of an omitted form, the agency will ask for it.
If the taxpayer contributes to a tax-deferred 401k benefits plan and has yet to receive distributions from the plan, the IRS does not consider the contributions taxable income. The amounts may be shown on a W-2 wage and salary statement as income subjected to Medicare, unemployment and Social Security taxes. However, because distributions from a 401k are taxable, contributions are not. In other words, the tax is deferred to a later date. The taxpayer should omit contributions to a 401k from gross adjusted income when filing federal taxes and this omission does not need correcting.
- Internal Revenue Service: Amended Returns & Form 1040X
- Internal Revenue Service: Instructions Form-1040
- Internal Revenue Service: Tax Topics - Topic 308 Amended Returns
- Internal Revenue Service: Tax Topics - Topic 424 401(k) Plans
- Internal Revenue Service; Ten Facts about Amended Returns; April 2011
- Internal Revenue Service. "Instructions to Form 1040X," Page 3. Accessed Jan. 6, 2020.
- Internal Revenue Service. "Instructions for Form 1040X," Pages 7-8. Accessed Jan. 6, 2020.
- Internal Revenue Service. "Instructions for Form 1040X," Pages 8-9. Accessed Jan. 6, 2020.
- Internal Revenue Service. "Form 1040X," Pages 1-2. Accessed Jan. 10, 2020.
- Internal Revenue Service. "Amended Returns." Accessed Jan. 10, 2020.
- IRS. "IRS announces Form 1040-X electronic filing options coming this summer; major milestone reached for electronic returns." Accessed July 9 2020.
- Internal Revenue Service. "Instructions for Form 1040X," Page 7. Accessed Jan. 6, 2020.
- Internal Revenue Service. "Instructions for Form 1040X," Page 3. Accessed Jan. 6, 2020.
Vicki A Benge began writing professionally in 1984 as a newspaper reporter. A small-business owner since 1999, Benge has worked as a licensed insurance agent and has more than 20 years experience in income tax preparation for businesses and individuals. Her business and finance articles can be found on the websites of "The Arizona Republic," "Houston Chronicle," The Motley Fool, "San Francisco Chronicle," and Zacks, among others.