If I paid taxes when I made a withdrawal from my 401k, why am I paying taxes on it again while completing my return?

[Bsch4477]

The tax you paid when you did the withdrawal will be reported on your 1099-R and will be applied toward your tax liability. 

[MinhT1]

No, you aren't paying taxes twice.

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. If too much tax was withheld, you'll receive a refund; otherwise, there'll be a tax due.

You have to enter that form 1099-R on your tax return.

You can enter your form 1099-R by following these steps:

1. In TurboTax, open your tax return
2. Click on the down arrow next to Federal in the left-hand column then on Wages & Income
3. Locate the section Retirement Plans and Social Security and click on the down arrow on the right
4. Click Start next to IRA, 401(k), Pension Plan Withdrawals (1099-R).

[DoninGA]

The taxes withheld from the distribution reported on the Form 1099-R are only an estimate.  The distribution is entered on your tax return as ordinary income and added to your other income being reported.

If your total tax payments are greater than your total tax liability you will receive a tax refund for the overpayment.

If your total tax payments are less than your total tax liability you will have taxes owed.

[ljporrello]

It looks like I paid 10% tax already which is what I thought the total the IRS takes? 

[VolvoGirl]

You didn’t actually pay the tax or the 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½). You had taxes withheld like from your paycheck. You still have to enter the whole gross amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The Gross amount shows up on 1040 line 4a or 5a and the taxable amount on 4b/5b. The withholding will show up on 1040 line 25b.

It has to break out and show the 10% penalty separately on your return (schedule 2 line 8 which goes to 1040 line 23). Then you get credit for all the withholding taken out on 1040 line 25b.

[jmcarmelite]

I have a Precious Medals Traditional IRA with Noble Gold.  They work through Equity Trust Company.  I'm 66 years old and last February of 2023 I withdrew $50,407.17 from the account and 10% was given to the Federal Government.  $45,366.45 was deposited into my Credit Union.  I received my 1099-R and while attempting to do my taxes for 2023 it appears that I still owe them $7000 more in taxes!  How is this possible?  

[DawnC]

It appears you are in a higher than 10% tax bracket.   The 10% was the amount they withheld, but if you are in a 22% tax bracket, the 10% withheld will not be enough to cover the taxes.

Check out this article about tax brackets, then choose your filing status and check your total income to find your tax bracket.   What are the federal tax rates for 2023?

@jmcarmelite 

[jmcarmelite]

The IRA withdrawal is what puts me in the 22% tax bracket.  Otherwise, I'm in the 12% bracket.   Outrageous!  

[jeca0408]

excellent explanation! thanks