59 1/2 withdrawal

Forum|Forum|5 years ago
May 16, 2021
2 replies
10 views

I used the 59 1/2 rule to withdraw money from my federal TSP account. I paid taxes on the amount as required. Am I paying taxes on it again when entering the 1099?

Not A Product Question

macuser_22

Alumni - Champ

You had withholding taken out, you are paying the tax now.

The box 4 withholding is added to all other withholding (like W-2 withholding) on line 16 of then 1040 form and will be used to offset your total tax liability.

If not enough was withheld to pay the tax that depends on your other income and marginal tax rate, then you might owe more or your refund will go down.

Often the default 20% withholding in a 401(k) is not enough unless you specifically asked for more to be withheld. Especially if you are under age 59 1/2 and the is an early withdrawal subject to the 10% penalty.

If that is the case then half of the withholding pays the penalty leaving only 10% for the tax and if you are in the 20% tax bracket, then the withholding was 10% short.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**