Withdrew from 401k early and paid extra 10% at time of withdrawl -- how do I denote this in TurboTax

[clwilbanks0]

Hi, I withdrew early from 401k because of change of employment. It told me at the time I should withhold an extra 10% on top of the 20% automatically done because of taxes so I did that. Is this something that's automatically factored in when putting in my 1099-R on TurboTax or is there a field to specify this in...? I doublechecked my information was correct with my form and it says "Based on your entries so far, your extra tax bill is [amount] ..." I thought I would not owe because I already gave the 10% at withdraw. I got to the end of my filing and I'm not seeing anything showing [amount] is being deducted so I'm not sure if this is something that I have to pay outside of TurboTax. This is my first time doing this so I'm confused. Thank you.

[DoninGA]

Any federal taxes withheld from the withdrawal are reported in box 4 of the Form 1099-R.  You enter your Form 1099-R as received.  The 10% early distribution penalty will be entered on your federal tax return, Form 1040, as a tax liability.

If your total tax payments are greater than your total tax liability then you will receive a tax refund for the overpayment.

If the total tax payments are less than your total tax liability then you will have taxes owed.

To enter, edit or delete a form 1099-R -

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

Or enter 1099-r in the Search box located in the upper right of the program screen. Click on Jump to 1099-R

[VolvoGirl · Accepted solution]

You didn’t actually pay the tax or the 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 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/5b. The withholding will show up on 1040 line 25b.

It has to break out and show the 10% penalty separately on your return (schedule 2 line 6 which goes to 1040 line 23). Then you get credit for all the withholding taken out on 1040 line 25b.

And by increasing your income you may lose some credits like the EIC. You can lose like up to 50% of it for taxes and penalties for federal and state.