They may have withheld taxes when you took the money out, now you need to report the withdrawal as income on your tax return, as it was not taxed when earned and deposited into your 401k

You'll pay the tax you actually owe on the money you withdrew from your 401k, and the amount of tax that was withheld withheld will be credited against any additional amount you owe. Of course, if what you owe in tax is less than what was withheld, it will be refunded.

You're only taxed once.. the withholding is simply a setting aside of that tax.

Hope that helps!

My husband and I did something similar and was in for a real surprise. We paid taxes on our withdrawals too. However, when this was added to our 1099's, it made it appear that we were well off. The tax bracket was high and so were the taxes! We ended up paying four figures and both of us are retired. Since we didn't have earned income, there was no way out for us.

Now we are very careful what we withdraw and do our best not to go over a certain amount.

Withdrawing from an IRA or 401(k) can be even more unpleasantly surprising if you are drawing Social Security.

As with the withholding from your wages, the taxes taken out at the time of distribution are only a payment towards the real tax. The final amount might be more or less than what was withheld, depending on your filing status, income, deductions, adjustments and credits.