topic My 1099-R reports $1400 Federal tax withheld, but I'm still paying $700 for early withdrawal. Why is that? in Retirement tax questions

My 1099-R reports $1400 Federal tax withheld, but I'm still paying $700 for early withdrawal. Why is that?

christopher-klop — Mon, 23 Feb 2026 09:57:06 GMT

Re: My 1099-R reports $1400 Federal tax withheld, but I'm still paying $700 for early withdrawal....

BillM223 — Sat, 28 Jan 2023 03:24:58 GMT

It sounds like the distribution was $7000, so that the penalty for the early withdrawal is 10% and the withholding is a "standard" 20%. That is, unless you instruct the IRA or 401(k) administrator to do otherwise, it is common for them to withhold 20% for your federal taxes.

But understand that the IRA or 401(k) administrator has no idea what your actual federal tax will be, because your tax is a function of your income, your deductions, and other personal factors that these administrators do not know. So the $1,400 is put into your tax account, to be used to pay whatever your final tax bill may be. This 20% does not specifically cover your early distribution penalty; instead all the taxes and penalties are calculated separately and applied against the total of your withholdings.

All is correct.

Re: My 1099-R reports $1400 Federal tax withheld, but I'm still paying $700 for early withdrawal. Why is that?

dmertz — Sat, 28 Jan 2023 03:42:42 GMT

The $1,400 is credited to you on line 25b of your Form 1040.

Re: My 1099-R reports $1400 Federal tax withheld, but I'm still paying $700 for early withdrawal....

christopher-klop — Sat, 28 Jan 2023 03:46:15 GMT

Thanks! That was helpful.