topic IRA Early Withdrawal in Retirement tax questions

IRA Early Withdrawal

mhinchmn — Wed, 17 Feb 2021 23:10:37 GMT

I had an early withdrawal of an IRA for $7,581.

I paid $1,668 for Fed taxes.

I paid $167 for CA State taxes.

Before I added this amount in TurboTax my taxes due were $503 Fed, $55 CA State.

After I added this amount in TurboTax my taxes due increased to $1,261 Fed, $592 CA State.

I understand the Fed increase of $758 due to the 10% early withdrawal penalty.

I don’t understand the CA State increase of $537 since CA only charges 2.5% for early withdrawal. That amount should be $190.

Why did my CA State taxes increase to $537 ($347 higher than expected)?

Re: IRA Early Withdrawal

AmyC — Thu, 18 Feb 2021 00:08:43 GMT

It may have bumped your income to reduce some other CA credits your were receiving. For example, CA EITC is income based. You may have added enough income to drop the amount allowed some or completely.

There are more CA credits. See Credits | FTB.ca.gov - Franchise Tax Board

You may want to compare your return before and after to see what really changed.

Re: IRA Early Withdrawal

mhinchmn — Thu, 18 Feb 2021 00:44:27 GMT

Thank you so much - that makes a lot of sense! I want to compare my return before and after so I can see the details of the changes but Turbo Tax wont let you see tax forms until you file. And, I don't want to file until l know what has caused this - UGH! Thanks, though - greatly appreciate you taking the time to answer my question.

Re: IRA Early Withdrawal

AmyC — Thu, 18 Feb 2021 00:53:47 GMT

You can do a state preview and see the basics. That might be enough. See How do I preview my TurboTax Online return before filing?

Re: IRA Early Withdrawal

mhinchmn — Thu, 18 Feb 2021 16:06:40 GMT

I just reviewed both tax scenarios: one with the $7,500 IRA added and one without it. It's crazy to think that additional income of $7,500 created an additional $710 in CA State income tax :(