401K

[Ann522]

I withdrew 50,000 from my 401K in 2022, and paid all income tax for 2022, will I have to pay pre-estimate tax for 2023 income tax on that 50,000 again? Thanks.

[DoninGA]

Taxes withheld from a 2022 401(k) distribution are only an estimate of the tax liability.  You will need to complete the 2022 tax return to see if your total tax payments are more or less than your total tax liability.

Your 401(k) plan administrator will make the Form 1099-R available on or before January 31, 2023 for distributions in 2022.  The Form 1099-R is entered on your tax return.

[SteamTrain]

The taxes you had withheld at the time of withdrawal, were only an estimated amount...or a fixed standard amount.....like your tax withholding for a W-2.

The actual tax assessed due to that 50k will be determined when you file your full tax return for 2022.

You get a 1099-R for it in  late Jan or Feb of 2023....you enter that 1099-R into the software, and the 50k gets added to your income, and the tax withholding listed in the 1099-R will be used as a credit for taxes paid.

Your 2022 tax return will be the final accounting of all your income, and all your prepaid taxes and withholding for 2022....including that 401k distribution.

1)  IF your total income, from ALL sources is low, then the $$ they withheld may have been too much and you might get a refund of some of it.

2)  IF your total income, from ALL sources is high, then the distribution may have pushed you into a higher tax bracket, and the $$ they withheld may have been too little.... you might owe some more tax when you file.

[fanfare]

@Ann522 

The answer to your question is No.

estimated tax is required solely for your actual 2023 income.

[SteamTrain]

OK, I see aht you might be thinking of

..............for 2023 quarterly Estimated taxes specifically.

The software's 2022 preparation of 2023 estimated taxes will use your 2022 income (including that 50k distribution) as the initial default calculation for 2023.....BUT, if you go thru the calculation's interview questions, step-by-step, you can remove that excess 50k of income, as long as you do not plan to take that kind if distribution again in 2023.   

And even if plans change, and you do decide you will need to do it later in the year, as long as you have sufficient $$ withheld from the distribution itself, it may not significantly affect your quarterly estimates.....but your final 2022 tax return results (refund or owe more) should tell you how to better handle the withholding from the 401k Distibution in the future.