The amount that Fidelity withholds will only be an estimate of the tax owed for the money you take from the 401k, just like the amount withheld from your paychecks is an estimated amount withheld by your employer. If you are younger than 59 1/2 there is an early withdrawal penalty of 10% and ordinary income tax for the money you take from the retirement account. You will receive a 1099R for that at tax time which must be entered on your tax return.
When you enter all of your income and all of the tax withheld, the software reconciles those amounts to calculate whether you get a refund or owe more.
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
