Did you have 20% withheld?
The 20% withheld is
just so you avoid the possibility of incurring an underpayment penalty. That
functions in the same way as your withholding on your W-2 does. If you don't
have enough withheld on a W-2 to meet your tax liability for the year, you
would owe additional taxes with your return as well.
In other words, it is
just an estimate of the total taxes that you may owe. It does not mean that it
will cover your entire tax liability for the year. The IRA withdraw gets added to
your ordinary income and that is what your tax liability is calculated on.
If you were under 59.5, there may also be a 10% early distribution penalty.
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