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If you were under the age of 59 1/2 when the funds were distributed from the IRA then there is a 10% early distribution penalty that will be assessed on your federal tax return and entered on the return as a tax liability.
Ok, so even though 10% was already withheld for taxes, an additional 10% gets withheld as a penalty? That makes more sense. I’m 52.
You have done this correctly by entering the tax withheld in box 4 of your form 1099-R.
As you are younger than 59 1/2, you will pay a 10% early withdrawal penalty, which will be calculated by TurboTax.
Tax withheld is just an estimated advance payment of your taxes. The final tax amount can only be determined when you fill out your tax return. The taxes withheld serve as a credit against your tax liability. If too much tax was withheld, you'll receive a refund; otherwise, there'll be a tax due.
Right...the 10% withheld when distributed, is just a pre-payment of the 10% penalty that is assessed in the calculations for your full tax return. You get credit for it by entering all the boxes on the 1099-R (box 4 is the Federal withholding done). Of course, depending on your total income and tax situation, that 10% pre-payment may not have covered all the taxes you owe.
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