1099-R...what am I doing wrong??

Question

I had a dispursement from from the retirement plan at the company I used to work for. I had taxes taken out in the payment to me. I am single with nothing special about my taxes other than this. Adding this has caused me OWE taxes. How can that be when I was sure to have that taken out of the payment?

Also, the gross distribution is more than I received...I am way confused. I had the penalties taken out BEFORE I received money.

Answer 1

You had the taxes withheld from the retirement plan, NOT the 10% penalty. the admistrator of the Retirement plan will only take out the Federal withholding Tax.not the 10% penalty. You are responsible for reporting the total amount of the dispursal and that includes the amount withheld for taxes and the penalty is based on the total withdrawl. The 10% penalty is an excise tax that is separate from withholding tax
Publication 575 http://www.irs.gov/publications/p575/index.html
Form 5329 http://www.irs.gov/pub/irs-pdf/f5329.pdf

Answer 2

perhaps there was not enough taxes taken out on the distribution. also, an early distribution means that you would be subject to a 10% penalty. so you have to figure that you owe that as well. what % of tax was withheld? divide this by gross distribution. it should be at least 20% to cover taxes and penalty.

of course the gross distribution is greater than what you received. you received the amount after the taxes were taken out.

Answer 3

You get a penalty for taking an early distribution. Not sure how much it will be, but the IRS inflicts a penalty, and that may cause you to owe.

Answer 4

Because not enough was withheld to cover your tax liability and the 10% penalty. The required withholding is almost never enough to cover your entire liability.

Answer 5

if it was a retirement plan and you didn't roll it over into another plan, then the IRS makes you pay a 10 percent penalty on that money.

Answer 6

did you add the amount withheld to your taxes paid?