The amount of withholding on a 1099-R is just like withholding on a W-2. It is an estimate of the amount of taxes owed on your tax return. For an early withdrawal prior to age 59 1/2, you must pay both ordinary income tax and a 10% early withdrawal penalty on the taxable amount. The amount withheld is entered on your tax return as a credit. The actual tax owe and penalty is the calculated in included in your tax liability. The penalty amount is entered on a separate line from the oridinary income tax liability. You may end up paying more or less than the amount withheld.
