Are IRA's or 401K's taxed?

Answer 1

You question is a little bit ambiguous. Are you talking about a contribution to or withdrawal from?

Contributions to a 401k are federal income tax exempt for the first $15,000 in 2006 if you choose pre-tax contributions. Each state is different in how they treat 401k contributions. Most agree with the feds, but some, like Pennsylvania, don't.

Contributions to a Traditional IRA are sometimes exempt from federal taxes and sometimes not depending on various thing like if you are covered by a plan at work, your filing status, your AGI, and if you take the deduction on your 1040. If you make non-dedutable contributions to your Traditional IRA, please be sure to fill out a form 8606. Again, every state is different.

Contributions to a Roth IRA are not federal or state tax exempt. In other words, you have to include any earnings you make and put into a Roth as income on your 1040. They are treated just like "post-tax" 401k contributions or non-deductable Traditional IRA contributions.

Withdrawals from a 401k or Traditional IRA that went in as tax-deferred (or pre-tax) or were earned by the fund are taxable to you when you withdraw them...period. There are no exceptions to this rule. If you withdraw them before the year in which you reach 59 1/2, you may also have to pay an additional 10% tax on the amount. There are exceptions to the 10% rule.

Withdrawals from a 401k, Traditional IRA, or Roth IRA that are part of the basis (meaning they were post-tax contributions) are tax-free upon withdrawal.

If you are asking, "are existing 401k or IRA accounts taxed even if you don't pull out any money during the year?", then the answer is definitely not. Any account that is left alone is not taxed. You will receive a statement showing you your earnings or losses, but you need not include any of that on your tax return. Loans from a 401k are also not taxed unless they go into default and are recharacterized as withdrawals.

I know I typed a lot, but your question was not specific enough to provide a smaller answer.

Answer 2

money taken from a 401K and placed right into a rollover classic IRA both right now or in the necessary time has no tax consequenses, notwithstanding you should report it. in case you roll the money right into a Roth IRA, you would pay the income taxes at even with cost you pay that 3 hundred and sixty 5 days. in case you're taking money out of your 401K and do not roll it right into a qualified plan, like an IRA or yet another corporation's 401K, then you surely owe income taxes as difficulty-free income for the three hundred and sixty 5 days you withdrew it. when you're less than fifty 9-a million/2, you also pay a 10% penalty on the quantity no longer rolled into yet another qualified plan. right now making an investment them into yet another funding agency except that is a qualified retirement plan does no longer ward off from paying the taxes.

Answer 3

Depends if the contributions were pre-tax or after-tax. If contributions were pre-tax, then the distributions will be taxed.

There is a 10% penalty from the IRS if you withdraw early from an IRA. I'm not sure if the penalty is the same for a 401K.

Answer 4

Traditional IRA and 401K contributions are not taxed. The distributions are taxed.

Answer 5

I believe 401K are only taxed if you withdrawl the funds early.IRA's I dont know anything about.

Answer 6

Usually after you withdraw the money. Most people choose to add to their 401(k) with pre-tax money, but some older people add to it with pre and after-tax money. (That way they can put more money into the 401(k)).