When you enter the Form 1099-R your withheld federal taxes from box 4 will be carried to Form 1040 line 25b. The payments will be deducted from the taxes due. The distribution is included in your taxable income and you will have to pay the 10% early withdrawal penalty unless you qualify for an exception. Depending on your tax bracket, the withheld taxes might not be enough to cover full tax due.
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