I have entered my 1099-r into turbo tax i had taxes withheld from this distribution at the time it was taken to cover the penalty. But after entering it turbo tax is still telling me i owe the same amount in taxes i have already paid or the 10% penalty. Put it simple i put in that i paid 109 in taxes for the distribution on the 1099-r but after the walk though it tells me i owe 109 in additional taxes but i have already paid the 109. why would i need to pay 20% for this distribution..
The software just tells you there is a 10% penalty...and one is calculated on your tax return.
The withholding already done, and that you entered in box 4 of the 1099-R form, will be applied as a credit against that penalty, and any other taxes you may owe for the early withdrawal,, or even any other taxes you may owe too.
So it balances out properly. That's the way it is supposed to work.
I have taken a early pay out from my Pension plan of $37,565.96 received $30,052.77 after $7,513.19 was taken out for Fed taxes (Box4).
Turbo tax is saying that I owe $3,756 (10%)
on form 1099-R (Box4) $7,513.19 (20%)(already taken out)
that is a total of $11,270.19 (30%)
It seems that Turbo tax is not seeing what has already been taken out ! It is showing in the Fed Tax Due box
$3981 in red (due). Why is this ? Needing some help here .....
You are thinking about this wrong.
1) Your tax return takes ALL your income from everywhere, including that 1099-R, and calculates a tax on ALL of it at whatever rates are appropriate for everything together , includes the penalty, and puts that amount on line 16 of the 1040.
2) Then it takes ALL your withholding...from every source, (including box 4 on your 1099-R) and puts all your withholding on line 17 of the form 1040...adds in a few other possible credits to get line 19....which includes ALL your credits.
3) The difference between these two is your refund...or balance due . So you ARE getting credit for having prepaid some of your taxes paid with that 1099-R because the $$ in box 4 of your 1099-R are included in line 19's value on the 1040.
Your tax return is the final Full-Year tax accounting for Everything..,.not just one form.
I agree with @SteamTrain
remember WHY we all do taxes this time of year.
1) employers and pension administrators, etc ESTIMATE how much tax is owed on earnings and pensions, etc and withhold it.
2) then you file your taxes to determine the ACTUAL amount that is owed.
3) the difference is the 'settle up' which results in more tax owed or a refund
I understand the amount already deducted, and it calculates any under payments = anything leftover is what is due ! !
What I don't understand is , if 20% tax has already been paid, then why should I owe another 10% for a total of 30%.
There is minimal 10% tax up to 25% ! Why am I going to have to pay 30% ?
it's hard to tell without a full review of your tax return.
1) what is your adjusted gross income? (line 8b)
2) how old were you on the date you received the pension payout? (over or under 59.5 years old)
3) what code is in Box 7 of the 1099-R?
4) are you filing single, joint or head of household?
5) are you taking social security? and is a portion of that taxable (what is on Line 5A and 5B?). Did you have any federal tax withheld from your social security payments (look at the 1099-SSA form on the right about half way down)
6) why do you think there is a minimum tax of 10% up to 25%. I am not familiar with that rule.