Im using Turbotax to file our taxes this yr for my new husband and I. Ive just done my own but now that Im married, we are filing jointly. So I went to the Turbotax site to buy the program and I was going to be the deduction maximizer but I see there is one for people who invest and declare their earnings from stocks and bonds etc. My husband has a Charles Schwab acct set up through his company for his 401K. Its managed by them and gets automatically diversified. We dont know much about how it works but its growing so we dont worry too much about it.
Do we declare its growth as an earning? And how do we find out how much it grew in 2006 alone? Would the investment program be the best one to buy as opposed to the cheaper version?
2007-01-07 15:56:39 · 3 answers · asked by MonkeyMama 6 in Business & Finance ➔ Taxes ➔ United States
No, you do not report the contributions you made to the 401k or the growth of those investments as earnings. That's the whole point of the 401k.
Contributions made by you during the year and any matching contributions made by your employer are non-taxable and are excluded from your W2 wages. You should be able to verify this on your pay stubs, etc. If you add up your gross earnings and deduct 401k contributions and any Sec 125 cafeteria benefits (such as health and dental plan premiums), you should arrive at your W2 wages. The starting point for your tax return is your W2 wages, so those other things are automatically excluded from your return.
Don't worry about the growth of your 401k funds. You won't pay taxes on those until you start making distributions from your retirement account, sometime after age 59 1/2!
Unless you have other investments, then buy the cheaper one!
2007-01-07 16:17:29 · answer #1 · answered by g-man 3 · 0⤊ 0⤋
The 401k is tax-deferred. This means that you do not pay income tax on any of it until you withdraw money. You do not report anything on your tax return until you withdraw money.
Your W2s will show the amount of 401k contribution in Box 12. Enter this into TurboTax, but it won't affect your return unless you are getting the Savers Credit (income below $50K for MFJ).
No need to buy the upgrade to TurboTax, the cheap version will do for your purposes.
2007-01-08 00:30:04 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
You don't have to pay taxes on the 401(K) earnings until you take money out of it. So you don't need to know anything about it for now.
2007-01-08 16:50:46 · answer #3 · answered by growing inside 5 · 0⤊ 0⤋