Took out 15k from 401k and est taxes were 3750, so took out 18750 and 3750 was withheld. Now i need to pay extra 3k (Fed+state). I thought the penalty was 10%?

[TL2]

Full story, I needed more money for a down payment, so I withdrew from my 401k prematurely.  I needed 15k and the estimated taxes was 3750 so I took out a total of 18750 and on my 1099-R it says that 3750 is Fed Tax Withheld.  However, I still owe another 3k (1827 Fed/ 1163 State) for this early withdrawal.  This means I'm paying 6750.  I read that the penalty is usually around 10%, though not always the case.  Does anyone know if this is really how much I should be paying as penalty? 

[Marketstar · Accepted solution]

You are correct, if a 401(k) is withdrawn prior to age 59 ½, the penalty is generally 10% , but you also owe income tax on the withdrawal because the IRS considers it income.

The withholding works just like a W-2. If you are under withheld, you will owe additional tax over and above the withholding.

For instance, you had withheld 20%.which included your 10% penalty leaving another 10% as income tax. If your tax rate is above 10%, you would owe additional taxes on the distribution.