The best thing to do when you do an early widthdrawl from a 401k or IRA is to set aside money for the taxes right up front. This way you do not have to worry at the end of the year when you file your taxes. Depending on your situation you could be in even worse shape if you do not put the money aside. When you do your taxes the IRS will be looking for the penalty and the additional taxes. if you do not have enough deductions or widthholding then you will have to pay the IRS. If you do not have enough funds to pay the IRS you can make payment arrangements. The bad thing with this is that you will have penalites and interest charges that are required by the IRS. Many people think that they will be better off at the end of the year or say I'll worry about that later. Why put yourself through that stress? Take care of it upfront and your life will be much easier.

You won't be given a choice on having taxes withheld. Unless you're taking a loan, the withdrawal will have 20% withheld and you may also be responsible for the 10% early withdrawal penalty when you file your taxes for the year.