The 20% that was taken out of your pension distribution is not the final tax on the distribution. It's withholding, just like the tax that's withheld from your pay when you work. The tax on the pension distribution is not calculated separately from your other income. At the end of the year you add up all your income for the year on your tax return, including the pension distribution, and your tax is calculated on the total. If the amount that was withheld during the year is more than the tax calculated on your tax return, you get a refund of the excess. If the amount that was withheld is less than the tax on your tax return, you have to pay the difference.