Withdrew money from Simple IRA and paid federal tax at the time of withdrawal. Why do I have to pay more taxes on it now that I am filing?

No, you aren't paying taxes twice.

 

Tax withheld is just an estimated advance payment of your taxes. The final tax amount can only be determined when you fill out your tax return. The taxes withheld serve as a credit against your tax liability. If too much tax was withheld, you'll receive a refund; otherwise, there'll be a tax due.

 

You have to enter that form 1099-R on your tax return.

 

You can enter your form 1099-R by following these steps:

 

1. In TurboTax, open your tax return
2. Click on the down arrow next to Federal in the left-hand column then on Wages & Income
3. Locate the section Retirement Plans and Social Security and click on the down arrow on the right
4. Click Start next to IRA, 401(k), Pension Plan Withdrawals (1099-R).

 

You didn't actually pay the tax or 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½).  You had taxes withheld like from your paycheck. You still have to enter the whole gross original amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The gross amount shows up,on 1040 line 4a or 5a and the taxable amount on 4b or 5b.  The withholding will show up on 1040 line 25b.

 

It has to break out and show the 10% penalty separately on your return, (Schedule 2 line 6 which goes to 1040 line 23).  Then you get credit for all the withholding taken out on 1040 line 25b.