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IRA, 401(k), or SEP IRA Distributions

How to enter retirement distributions in Scenario Analysis.

IRA, SEP IRA, and SIMPLE IRA Distributions

Enter any IRA, SEP IRA, or SIMPLE IRA distributions into the IRA Distributions field in the 1040 Income section.  These will be taxed as Ordinary Income. Access the IRA Distributions Worksheet by clicking on the pencil icon to break out and report those distributions by taxpayer and type. 



Within the IRA Distribution Worksheet, users have the option of entering a single distribution for the entire household or separating out distributions by taxpayer. We recommend breaking out the distributions by taxpayer and type as a best practice.

Some states require distributions reported by taxpayer for their state tax calculations. As a best practice, allocate IRA distributions to Taxpayer 1 or Taxpayer 2 instead of the Taxable IRA Distributions (Override - All taxpayers and types combined) field when possible. Be sure to delete the override amount so the individual entries apply!

If the date of birth for the clients has been entered in their client household screen and the IRA distribution has been allocated to either Taxpayer 1 or Taxpayer 2, Holistiplan will call out when a distribution occurs for someone under age 59.5. We'll also note that an early withdrawal penalty may be assessed. Below, we see the 10% penalty is flagged as outlined. If a client is exempt from that early withdrawal penalty, check the applicable box.



If the taxpayer is indicated to be under age 59.5 and the box for Exempt From Early Withdrawal Penalties? remains unchecked when the IRA Distribution Worksheet is closed, a warning message will display on the main Scenario Analysis screen next to the IRA Distributions value, reminding users of the possibility of an early withdrawal penalty.

Amounts entered as Inherited IRA Distributions will not produce any early withdrawal penalties. For example, Required Minimum Distributions (RMDs) arising from Inherited IRAs can be entered for Taxpayer 1 and/or Taxpayer 2, and no early withdrawal penalty will be calculated for or applied to your scenario.


Any early withdrawal penalties will be applied to the scenario, and can be seen in the Other Taxes section found before Refundable Tax Credits and under the Additional Taxes sub-section. This early withdrawal penalty will be included in the Total Tax figure for any given scenario.



If entering QCDs (Qualified Charitable Distributions) as well, we recommend reviewing our article on QCDs for more guidance on modeling that gifting strategy. 

 

401(k), 403(b), and Governmental 457(b) Plan Distributions

Per Form 1040 Instructions, 401(k), 403(b), and governmental 457(b) plan distributions are reported as Pensions and Annuities. Enter these distributions into the Taxable Pension and Annuities field in the 1040 Income section.

Within the Taxable Pension and Annuities Worksheet, users have the option of entering a single distribution for the entire household, or by separating out distributions by taxpayer. We recommend breaking out the distributions by taxpayer and type as a best practice.

Some states require distributions reported by taxpayer for their state tax calculations. As a best practice, allocate distributions to Taxpayer 1 or Taxpayer 2 instead of the Taxable Pension and Annuities Distributions (Override - All taxpayers and types combined) field when possible.