Forfeited 401k matching funds deductible?

[colceh]

VIRGINIA

I switched jobs in the middle of 2013. When I left the old job, I (knowingly) forfeited a couple of thousand bucks in employer matching funds in that old job's 401k because those funds weren't vested when I resigned. After the new year started, the Plan managers sent me a detailed report identifying to the penny how much I forfeited. The old employer had contributed that money to the Plan, for my benefit, but because I wasn't vested when I left, it got forfeited to the Plan after 31 Dec of that year.

It seems like I should be able to claim this amount as a loss somewhere on my personal tax return for that year. If so, how/where? I suppose the natural follow-on question is that to be able to deduct that 2K as a loss I would also have to claim it as income (or equivalent) in the same return, even though I didn't actually receive any of it. True? How/where?

Seems like this affects millions of people every year but I'm not seeing it well-addressed when I google it...

Thanks.

 

[LdiJ]

VIRGINIA

I switched jobs in the middle of 2013. When I left the old job, I (knowingly) forfeited a couple of thousand bucks in employer matching funds in that old job's 401k because those funds weren't vested when I resigned. After the new year started, the Plan managers sent me a detailed report identifying to the penny how much I forfeited. The old employer had contributed that money to the Plan, for my benefit, but because I wasn't vested when I left, it got forfeited to the Plan after 31 Dec of that year.

It seems like I should be able to claim this amount as a loss somewhere on my personal tax return for that year. If so, how/where? I suppose the natural follow-on question is that to be able to deduct that 2K as a loss I would also have to claim it as income (or equivalent) in the same return, even though I didn't actually receive any of it. True? How/where?

Seems like this affects millions of people every year but I'm not seeing it well-addressed when I google it...

Thanks.

No, its not deductible. Since you never paid taxes on the money to start with, its not something that can be deducted.

Let me give you an example so that you can try to understand the concept. Lets say that you take 20k of money out of your savings account (that you already paid tax on when you earned it) and you invest that money in a stock. The stock then tanks and you can only sell the shares for 5k and you do sell them for 5k so you actually realize the loss. The 15k loss is deductible (at least over time) because you paid for it with after tax money.

Again, the non-vested 401k funds that you lost were never yours to start with (because you were not vested) and you never paid tax on the money, therefore its not deductible.

 

[davew128]

Again, the non-vested 401k funds that you lost were never yours to start with (because you were not vested) and you never paid tax on the money, therefore its not deductible.

Well its the latter rather than the former. Had the employee invested his own 401k contributions in an investment that tanked it still wouldn't be deductible.

 

[LdiJ]

Well its the latter rather than the former. Had the employee invested his own 401k contributions in an investment that tanked it still wouldn't be deductible.

Its both...and the OP needs to understand that. The OP thinks that he/she lost money because non vested funds were forfeited. The OP needs to understand that the funds were not actually lost because the funds never belonged to him/her in the first place...regardless of the tax consequences.

 

[davew128]

Well no, it's not both. Yes, it was never the OP's to lose. No, that has nothing to do with its non-deductibility.