Why is my pension payout being taxed at 40%?

[mariacrenshaw]

I took a total payout of my pension and 20% was withheld at that time for federal taxes.  Now I'm being taxed another 20%.  Is this correct?  I was expecting to pay another 10% for a total of 30.

[Texas Roger · Accepted solution]

The ordinary income tax you must pay depends on what tax bracket you are in. If the tax and penalty add up to 40%, that means you are in the 28% and 33% tax brackets for your distribution averaging out to 30%. 10% is for the early withdrawal penalty. 

As I assume you know, you get credit on your tax return for the 20% already withheld when you enter the withholding amount shown on your 1099-R into TurboTax.

[dmertz]

If your tax return includes Social Security income, the pension payout can push more of your Social Security income to be taxable.  This can increase your federal marginal tax rate to as high as 46.25%.

[mariacrenshaw]

TRoger and DMertz:  Thank you for the information.