topic We had federal tax and the early withdrawl penalty taking out of my IRA distribution but our refund still went way down? We don't understand why? in Retirement tax questions

We had federal tax and the early withdrawl penalty taking out of my IRA distribution but our refund still went way down? We don't understand why?

dawndhartley37 — Fri, 31 Jan 2020 02:34:55 GMT

Re: We had federal tax and the early withdrawl penalty taking out of my IRA distribution but our refund still went way down? We don't understand why?

Critter — Fri, 31 Jan 2020 02:42:06 GMT

The best way to see what happened is to review the return with and without the pension distribution ... but a couple guesses are :

> you may have had 20% withheld however the amount pushed you info a higher tax bracket ... like if you are in the 22% bracket + 10% penalty you needed 32% withheld so you are 12% short

> it could have affected several credits

Re: We had federal tax and the early withdrawl penalty taking out of my IRA distribution but our refund still went way down? We don't understand why?

dawndhartley37 — Fri, 31 Jan 2020 12:52:07 GMT

Hi thanks for your feedback! I actually looked at it again with a fresh pair of eyes this morning and realized that what reduced our refund was that once I put the IRA in it reduced the amount of earned income credit we are receiving. It went from $1663 down to $406 so that is why.