Taxes

[pnutndaisy]

Hello.  We withdrew money out of my husbands 401k to help out this past year and we had taxes taken out and the retirement company said we wouldn't be penalized.  But we are being penalized.  Please help me if I am suppose to enter something specific or what please cause it has us owing a huge amount of money.  We don't have that kind of money!!!

[VolvoGirl]

You still owe tax on it but there might not be the 10% Early Withdrawal Penalty on it.

You didn't actually pay the tax or 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½).  You had taxes withheld like from your paycheck. You still have to enter the whole gross original amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The gross amount shows up,on 1040 line 4a or 5a and the taxable amount on 4b or 5b.  The withholding will show up on 1040 line 25b.

[fanfare]

The penalty tax is 10%.

Were you affected by COVID in 2020?

If not, there is no waiver of the early withdrawal penalty.