If you are under age 59 1/2 or were under age 55 when you separated from the previous employer then there will be a 10% early distribution penalty assessed on your federal tax return Form 1040. The penalty is assessed on the gross amount distributed and entered as a tax liability on your tax return.
The distribution will be reported to you on a Form 1099-R. The form is mailed to you by the plan administrator in January of the year. The amount distributed is entered on your tax return as ordinary income and taxed at your current tax rate. Any taxes withheld from the distribution are entered on your tax return as a tax payment.
