If I withdraw $3,000 from my 401k from a previous employer and rollover into an existing traditional IRA, how much in taxes should I have withheld. I know there is a 10% penalty, should I have an additional 42% witheld to prevent having to pay any additional taxes? My current annual income is around $63k and there is over $20k in the IRA and I live in Texas.
The BIDaWIZ Team's Answer:
If your total income is $63,000, then you would be in the 25% tax bracket if you're a single tax filer. Texas has no state income tax which appears to be your state of residence, so you don't need to worry about that. Why would you withhold 43%, in addition to the 10% withholding to account for the penalty? Based on the facts that you've presented, 25% withholding + 10% penalty would make more sense.