I paid 20% federal tax on my lump sum cash out of my retirement and this program added another $7000 in tax?

I was told when I cashed out that the amount of tax to pay was 20%. Is there a reason why that wasn't correct? Is it because it threw me into a higher tax bracket?

posted

The 20% taxes withheld is treated like withholding taxes on your W-2 (advanced tax payment). It isn't your taxes owed-it is a IRS required minimum prepayment.

The distribution is added to your income along with other income items and taxed at your tax rate. This can often push you into another tax bracket.

See link below.

http://blog.turbotax.intuit.com/tax-tips/about-withholding-on-retirement-withdrawals-126/

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