topic The 20% withheld is just so you avoid the possibility of... in Retirement tax questions https://ttlc.intuit.com/community/retirement/discussion/the-20-withheld-is-just-so-you-avoid-the-possibility-of/01/714468#M68338 <P>The 20% withheld is just so you avoid the possibility of incurring an underpayment penalty. That functions in the same way as your withholding on your W-2 does. If you don't have enough withheld on a W-2 to meet your tax liability for the year, you would owe additional taxes with your return as well.<BR /></P><P> </P><P>In other words, it is just an estimate of the total taxes that you may owe. It does not mean that it will cover your entire tax liability for the year. The withdraw gets added to your ordinary income and that is what your tax liability is calculated on.</P><BR /><P></P> Thu, 06 Jun 2019 14:30:50 GMT PaulaM 2019-06-06T14:30:50Z Why did my refund reduce from taking total distribution of IRA? Even though they did withhold federal taxes? https://ttlc.intuit.com/community/retirement/discussion/why-did-my-refund-reduce-from-taking-total-distribution-of-ira-even-though-they-did-withhold-federal/01/714459#M68334 Thu, 06 Jun 2019 14:30:48 GMT https://ttlc.intuit.com/community/retirement/discussion/why-did-my-refund-reduce-from-taking-total-distribution-of-ira-even-though-they-did-withhold-federal/01/714459#M68334 kalaj1110 2019-06-06T14:30:48Z The 20% withheld is just so you avoid the possibility of... https://ttlc.intuit.com/community/retirement/discussion/the-20-withheld-is-just-so-you-avoid-the-possibility-of/01/714468#M68338 <P>The 20% withheld is just so you avoid the possibility of incurring an underpayment penalty. That functions in the same way as your withholding on your W-2 does. If you don't have enough withheld on a W-2 to meet your tax liability for the year, you would owe additional taxes with your return as well.<BR /></P><P> </P><P>In other words, it is just an estimate of the total taxes that you may owe. It does not mean that it will cover your entire tax liability for the year. The withdraw gets added to your ordinary income and that is what your tax liability is calculated on.</P><BR /><P></P> Thu, 06 Jun 2019 14:30:50 GMT https://ttlc.intuit.com/community/retirement/discussion/the-20-withheld-is-just-so-you-avoid-the-possibility-of/01/714468#M68338 PaulaM 2019-06-06T14:30:50Z