1099-R (withdraw from Retirement account.) The payer already withheld approximately 10% tax, but Turbo Tax is attempting to withhold an additional 10%. Is there a Bug?

[twilson380]

Turbo Tax is trying to add an additional 10% after payer withheld appropriate amount.  I did add Box 4 and Box 14 to indicate tax withheld.

[xmasbaby0]

The money you took out of the retirement account is taxable income.. You pay ordinary income tax as well as the early withdrawal penalty.    The amount that was withheld was an estimated amount---just like when an employer withholds tax from your paycheck and puts it on your W-2.   You enter the amounts and the software calculates your tax due or refund based on the total amount of income you received and the amount that was withheld.     

[twilson380]

Hello @xmasbaby0 ,

I understand that it is taxable income, what I don’t understand is that the payer has already withheld 10% tax and the software is saying that 10% tax should still be paid on the total amount withdraw (exact same amounts). This seems like a software bug which equates to over 20% tax.

[VolvoGirl]

You didn’t actually pay the tax or the 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½). You had taxes withheld like from your paycheck. You still have to enter the whole gross amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The Gross amount shows up on 1040 line 4a or 5a and the taxable amount on 4b/5b. The withholding will show up on 1040 line 25b.

It has to break out and show the 10% penalty separately on your return (schedule 2 line 8 which goes to 1040 line 23). Then you get credit for all the withholding taken out on 1040 line 25b.