I recently had $4000 removed from my Roth IRA to avoid the 6% penalty, due to my MAGI range and allowed Roth Ira contributions. I did not roll it in to a traditional IRA and instead had it transferred to my brokerage account. When I requested to have the excess contributions removed, they asked me if I wanted to either A) NOT withhold federal income tax, or B) specify the % of federal income tax I wanted to be withheld. My understanding is that I do NOT want to withhold federal income tax because my money I contributed to the Roth and then removed is already taxed.
Was I supposed to withhold federal income tax on the contributions I removed? If so, how much?
BTW - this was all done with Schwab. The form I used to fill out is available at the following URL (section 4 has the verbiage about federal income tax withholding): https://client.schwab.com/secure/file/P-221581/IRA_Rechar_Excess_APP13581.pdf
