Under the rules that I’ve been in place for a long time, you would’ve had 60 days to roll over the entire amount $818 into a new IRA. Fidelity did not do this for you automatically because your account was under $1000, but you could have done it on your own by opening a private IRA at any qualifying institution that would accept your deposit. To be a complete rollover you would have to deposit the entire amount withdrawn including the withheld taxes, which means you would have to come up with a tax money from someplace else. Then, the rollover would be non-taxable and you would get the withheld taxes back with your tax refund.
You should have been advised this option in your paperwork.
Because you did not do a rollover contribution within 60 days, the entire withdrawal is taxable. The 20% that was withheld by Fidelity is only a required minimum, and does not necessarily represent the tax you owe. The tax you owe might be 0%, 10%, 12%, 22%, or something higher depending on your overall income. Then you also owe a 10% penalty if you’re under age 55. The total tax is calculated on your tax return and you get credit for the withholding, and if you owe more tax it will be subtracted from your refund or added to your overall tax bill.
Something in my mind suggests that the secure act extended the deadline for making rollover contributions but I can’t verify this through Google right now. Someone else may know better than I do. If the deadline was extended, you might have the opportunity to make a rollover contribution now and keep the money in your retirement and then you would not pay the tax. (You would also not have access to the $500 you have left over; you would have to put it away until you retire.)
