Technically it doesn't tax it separately but it adds 1/3rd of your withdrawal as taxable income, subject to all the other taxes/deductions etc. so it's more complicated, but what I meant was it should wind up reducing your refund by something like the taxed amount on the 1/3 value. If it bumps you into a hirer bracket or adds to much to your AGI for some other deduction it could be different. Things I will look out for:
- Did it accidentally add the ENTIRE amount instead of 1/3 to your AGI?
- Did it charge the 10% penalty tax?
I don't know how much you can peak behind the curtain, but it should basically add 1/3rd your borrowed amount to your income and tax appropriately. I was describing a way to ball park the difference I expect to see before.
