You didn't pay 18% tax on the withdrawal, and you're not being double taxed. The 18% was withholding. Withholding is an advance payment towards your total tax for the year. You got credit for that payment on your tax return. Your tax return calculated the total tax on all your income for the year, including your wages, the 401(k) withdrawal, and any other income you had. It also added up all your withholding for the year. You had tax withheld from your pay and from the 401(k) withdrawal. Then it applied the total withholding against your total tax. Apparently the total withholding was less than the total tax, so you had to pay the difference.
