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Taking early withdrawal from IRA. Does 1099-R show I got full amount or amount after 10% penalty that was already withheld?

Forum|Forum|7 years ago
June 4, 2019
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I've never gotten a 1099-R or any type of extra money outside of W-2 reporting, so I'm flying completely blind and want to save myself from a huge surprise of a tax bill come April. My 2016 tax rate was 4.35%. Should I have IRA withhold the 10% penalty AND an additional 10% to cover taxes? Does it make a difference whether it's withheld by the company or if I just save the 10% myself as earmarked for the tax bill I know I'll have to pay?

Best answer by VolvoGirl

The 1099R will show the full Gross distribution before the withholding is taken out in box 1. All the withholding (including the penalty withholding) will be in box 4. You can do it either way. The gross distribution will add to your other income and may push you into a higher tax bracket so I would have them take out the 10% Early Withdrawal Penalty too. If you end up owing too much on your tax return there is Also an underpayment penalty.

VolvoGirlAnswer

Employee

The 1099R will show the full Gross distribution before the withholding is taken out in box 1. All the withholding (including the penalty withholding) will be in box 4. You can do it either way. The gross distribution will add to your other income and may push you into a higher tax bracket so I would have them take out the 10% Early Withdrawal Penalty too. If you end up owing too much on your tax return there is Also an underpayment penalty.