Filing your annual income tax return can get a bit complicated, especially when you have a long list of deductions, credits and other adjustments to offset against your income. Start with the amount in box 1 on your W2 form, Wages, Tips and Other Compensation, and work your way down the tax form. For 401(k) contributions, don't worry about adding them in because, in most cases, you're already covered.
You usually do not have to worry about claiming traditional and Roth 401(k) contributions on your tax return since these are already accounted for in your taxable income. The exception is for Solo 401(k) plans, in which case you'll need to amend your tax return to claim those.
Each year, your employer must mail you a W-2 form by January 31st, listing the wages paid to you and each amount of tax deducted or withheld from your pay. You'll use this information to fill out your annual federal and state income tax forms. You don't need to include regular 401(k) tax documents or Roth 401(k) contribution amounts on your tax forms. But if you want to double-check your contribution for the year, you'll see your total amount contributed in box 12 on your W-2 form with the letter code D, which signifies a pre-tax contribution that you made to your employer's 401(k) retirement plan.
Pre- and Post-Tax 401(k) Contributions
For your traditional 401(k) retirement account, your employer pulls the money out of your paycheck before you get taxed on it. For this reason, the taxable income that you enter on your IRS Form 1040 has already been adjusted, or reduced, to account for your 401(k) contribution. If you entered the amount on your Form 1040 anyway, you would report the 401(k) on your taxes twice. If you are putting money into a Roth 401(k) plan, you won't need to show this on your Form 1040 either. Funds going into a Roth 401(k) plan have already had taxes withheld since you make the contribution yourself with after-tax funds from your paycheck.
Solo 401(k) Plans
A Solo 401(k) plan works differently, as this is a retirement plan set up for small business owners. In this case, as a business owner, you would be both employer and employee. For this reason, show the contribution to your 401(k) on tax Form 1040. For the 2017 tax year, you record the amount on line 28 for self-employed SEP, SIMPLE, and qualified plans in the Adjusted Gross Income section of Form 1040.
What About IRA Accounts?
IRAs, or individual retirement accounts, come in different flavors – Roth or traditional. For a Roth IRA, just like a Roth 401(k), you've made the contribution with after-tax dollars, so there's nothing to show on your Form 1040 tax return. For a traditional IRA, however, you do have to show your contribution on your tax form. In the Adjusted Gross Income section of Form 1040, enter your IRA contribution on line 32. For the shorter Form 1040A, enter your IRA contribution from your 401(k) tax documents on line 17. If you forget to add your traditional IRA contribution, you run the risk of overpaying taxes to the IRS or getting a smaller refund than you should receive.
Report 401(k) on Taxes
If you discover that you forgot to add a Solo 401(k) or IRA contribution to your tax return, you can redo your return with the proper amounts on IRS Form 1040X, Amended U.S. Individual Income Tax Return. Once you submit the amended return to the IRS, it basically replaces the return you sent in previously. This allows you to record your contribution, adjust your taxable income appropriately and get back any overpayment you made by mistake. One caveat exists, however: You only have three years to file an amended return. After that time, the IRS will not accept an amendment. Even if you have money owed to you, you lose the right to that money after three years if it's not claimed.
Upcoming Changes to Form 1040
It's worth noting that beginning with the 2019 tax season, the IRS plans to introduce taxpayers to a new, more streamlined version of the U.S. Individual Income Tax Return. This new form will replace all current versions of Form 1040 such as the 1040A and the 1040EZ. As a result, where you list your 401k contributions going forward will likely change. Consider consulting with a qualified tax professional, or familiarize yourself with the new 1040, before you attempt to file your 2018 taxes.
- Oblivous Investor: Where Do I Deduct My 401(k) Contribution?
- H&R Block: How to Report Solo 401(k) Contributions
- The Street: What's in Box 12 of My W-2? A Guide Through the Tax Form Confusion
- IRS: Form 1040
- What tax benefits do 401(k)s offer? - Ultimate Guide to Retirement
- IRS: IRS Working on a New Form 1040 for 2019 Tax Season
- IRS. "Income Ranges for Determining IRA Eligibility Change for 2021." Accessed Nov. 5, 2020.
- IRS. "IRA FAQs—Contributions." Accessed Nov. 5, 2020.
- IRS. "2020 IRA Contribution and Deduction Limits Effect of Modified AGI on Deductible Contributions If You Are Covered by a Retirement Plan at Work." Accessed Nov. 5, 2020.
- IRS. "2020 IRA Contribution and Deduction Limits Effect of Modified AGI on Deductible Contributions if You are Not Covered by a Retirement Plan at Work." Accessed Nov. 5, 2020.
- IRS. "Amount of Roth IRA Contributions That You Can Make for 2020." Accessed Nov. 5, 2020.
- IRS. "IRA FAQs—Rollovers and Roth Conversions." Accessed Nov. 5, 2020.
- IRS. "Rollover Chart." Accessed Nov. 5, 2020.
Cynthia Gaffney has spent over 20 years in finance with experience in valuation, corporate financial planning, mergers & acquisitions consulting and small business ownership. She has worked as a financial writer for online finance publications since 2011, including eHow Money, The Motley Fool, and Sapling.com. She has also edited for several online finance publications, including The Balance, Opposing Views:Money, Synonym:Money, and Zacks.com. A Southern California native, Cynthia received her Bachelor of Science degree in finance and business economics from USC.