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j-delroy
New Member

There was 10% withheld from my early Ira withdrawal. Is the 10% extra tax that I’m seeing when filing something I’ve already paid ;that I’m getting charged twice for?

 
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2 Replies

There was 10% withheld from my early Ira withdrawal. Is the 10% extra tax that I’m seeing when filing something I’ve already paid ;that I’m getting charged twice for?

No.  The withholding is for federal taxes withheld from your distribution, just like taxes withheld on a W-2.  Those taxes withheld on the Form 1099-R box 4 flow to the federal tax return, Form 1040 Line 25b as a tax payment.

 

The 10% early distribution penalty is assessed on the federal tax return as a tax liability.

AnnetteB6
Employee Tax Expert

There was 10% withheld from my early Ira withdrawal. Is the 10% extra tax that I’m seeing when filing something I’ve already paid ;that I’m getting charged twice for?

No, it may seem like you are being charged twice, but you're actually not.

 

If you took an early distribution from your IRA and did not meet an exception, then the expectation is that you would be charged a 10% early distribution penalty.  The 10% that was withheld from your distribution was 'set aside' to cover that penalty, but it was not considered to be paid at that time.  

 

The penalty is paid when you report the distribution on your tax return and the 10% that was taken from your distribution to cover that penalty is included as withholdings on your return to help cover your income tax liability.

 

It is just like having taxes withheld from your paychecks.  You know you may owe taxes and some of your wages have been 'set aside' to pay the tax.  But, until you file the return, you do not know if the amount set aside was enough or too much.

 

@j-delroy 

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