Taxes were taken out of my Qualified Disaster Withdrawal from my 401k, so why am I paying taxes on it again?

[piccolo113]

Of the $33,348.03 withdrawn, Federal withheld $3,334.80 and State withheld $2,667.84. Why am I being taxed more? I'm certain I put in the Federal Withheld and State Withheld amounts in that section while I was filling out the forms, but I was still asked if I wanted to pay all the taxes now or spread over 3 years.

Even looking at the final filled out form after filing, I can't see where it mentions anything about taxes already paid, only that it incorrectly shows the full amount of $33,348.03 as what I took instead of the $27,345.39 that I actually took once the amounts for State and Federal were withheld from the withdrawal.

(I realize I should have thought of this and asked before filing, but oh well...)

[piccolo113]

*State Withdrawal was 2,667.84. 

[ThomasM125]

The ten percent  that you had withheld is probably a lower percentage than your marginal federal tax rate. The tax rates rise as your income rises, from a low of 0 to 12%, then 24%, then 32% on up to a maximum federal tax rate of 37%. So, you are getting credit for the taxes you had withheld, but it was not enough to cover the marginal tax on your pension distribution.

Here's a link to the federal tax brackets:

https://www.kiplinger.com/taxes/tax-brackets/602222/what-are-the-income-tax-brackets-for-2021-vs-202...

For the state tax, you probably didn't have enough withheld either, but you'd have to look up the tax rate in your state to check on that.