I recently made the (questionable?) decision to withdraw $25,721 from my 401k to pay off a 401k loan and several debts that were going to make it impossible to pay my student loan payments even after the repayment plan was discussed with my provider. I understand after reviewing the irs.gov guidance on this that there will be a 10% penalty.
At the time of withdrawal, 20% was withheld for tax purposes. When I file my 2021 taxes, I am expecting a 1099-R. My income reported last year for 2019 was $71k. my income for this year will go up slightly due to a promotion and raise due to the education. The letter I got from my 401k manager stated that the amount I withdrew is being considered "INCOME" does this move me into a new tax bracket? How much more will be the tax penalty. Will I lose another 10% on top of the 20% already taken out?
Thank you very much for your time.
