topic Amended 1099-R Distribution in Retirement tax questions

Amended 1099-R Distribution

jacobm111 — Fri, 17 Feb 2023 04:41:55 GMT

I filed my taxes and then got later a 1099-R on a small distribution I received during the year.

The distribution was for $5770

Federal tax: $1154 was withheld.

So, they withheld 20% which is correct and because I'm under 59 1/2 I know there is a 10% charge on top, which would be another $570 (roughly).

In Turbo tax, it says I now owe $688 to Federal after I inputted everything. Any insight on this? I've tried getting an "Expert" several times and the "helpful" help on the side won't connect me.

Re: Amended 1099-R Distribution

DawnC — Fri, 17 Feb 2023 05:08:20 GMT

The 10% penalty would be $577. Plus you owe regular income tax on the distribution (your tax rate x $5770). They are required to withhold 20%, but that is usually not enough to cover both ordinary tax plus the penalty.

Did you complete a 1040-X? If you already filed, you can't change the return you filed, you have to file an amended tax return - Form 1040-X. The amended return will only show the 1099-R and the associated changes to your tax bill.

Your tax rate can be found here

Re: Amended 1099-R Distribution

jacobm111 — Fri, 17 Feb 2023 05:14:27 GMT

That actually adds up perfectly because I am at 22%.

Tell me this, why does it say when I file my taxes my rate is 15% after deductions, but then 22% on this? Just curious so I understand. Would the withholding have been different if I didn't have to file an amended?

Re: Amended 1099-R Distribution

dmertz — Fri, 17 Feb 2023 12:56:15 GMT

TurboTax tells you what it calls an "Effective Tax Rate" which is just income tax (Form 1040 line 16) divided by AGI (Form 1040 line 11) and is a relatively useless number when it comes to managing your taxes. What you really care about is your marginal tax rate, the tax rate applied to incremental income. Your marginal tax rate begins with your tax bracket rate but can be affected by side effects such as a change in the taxable amount of Social Security, changes in deductions or changes in tax credits caused by the change in AGI. To figure your marginal tax rate you need to divide the change in tax liability by the change in reported income.

In your case there appear to be no side effects and your marginal tax rate is just your tax bracket rate of 22% plus the 10% early-distribution penalty.