401K Early Withdrawal

[Camaroman28]

I received a 1099-R in the mail for an early 401K withdrawal. I had my 401K company take out the usual 20% tax plus the extra 10% penalty so I wouldn't have to worry about it. When I am putting my 1099-R information in to TurboTax Deluxe it wants to take an additional 10% out as a penalty although I already had the penalty amount taken out. Is there a way around this? 

[dmertz]

What was taken from the distribution was tax withholding.  Tax withholding is simply a down-payment against the tax liability eventually calculated on your tax return.  The actual increment in your tax liability resulting from the 401(k) distribution is not determined until you prepare your tax return.  When you enter the Form 1099-R into TurboTax, the federal tax withholding shown in box 4 of the Form 1099-R is credited on Form 1040 line 25b to be subtracted from your overall tax liability.

[TomD8]

The program will calculate the entire tax you owe, including the 10% penalty.  But it will then credit you for the entire amount of tax you've already paid in, including the "extra" amount you added.  So, no problem.  

[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.