IRA distribution tax penalty

Forum|Forum|7 years ago
June 1, 2019
1 reply
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I took an early distribution of 13k. I had them take out 20% off the top of the distribution for tax purposes, 10% for the normal penalty and another 10% on top. On my 1099R, it shows 20% in Box 4. Whenever I entered that amount into TurboTax online, it seemed like I took another penalty because it lowered my refund by about 2k. Is that correct? or, Should Box 4 of the 1099R on be 10% of the total distribution.
I tried to have the IRA company withhold the maximum amount so I would not incur any penalties.

TurboTax Deluxe Online

T

TurtleAnna

Employee

You're likely seeing your refund drop because you owe more than 10% income tax on the distribution. If you're in a higher tax bracket than 10% (which is very low), the 20% withholding will not cover your additional tax liability (income tax plus 10% penalty) from an early distribution.