Does my early withdrawal from traditional IRA get added to YTD wages on the IRS calculator or just put FITW amount in the box below?

Thanks for that explanation. But wait, I'm confused about where exactly on the withholding calculator I should put the IRA distribution amount itself? Is there a specific section for that? And will the calculator automatically figure in the 10% early withdrawal penalty or do I need to add that somewhere too?

In the withholding calculator, there should be a section for "other income" - that's where you would enter the full amount of your IRA distribution ($15,000). The calculator doesn't automatically calculate the 10% early withdrawal penalty, so you'll need to account for that separately when planning your tax situation. For the federal tax that was already withheld from your distribution (the 20% or $3,000), you'll include that in the section asking about federal income tax already withheld this year, along with any withholding from your regular paychecks. This helps the calculator determine how much more needs to be withheld from future paychecks to cover your total tax liability.

Is this an actual IRS tool or some third party thing? I'm always skeptical about putting my tax info into random websites. How do you know it's calculating everything correctly?

Does it handle state tax calculations too? I took an early withdrawal from my 401k (not IRA) and I'm trying to figure out both the federal and state implications. Also, does it actually complete the forms for you or just tell you what to put where?

It's not an IRS tool, but it's a secure third-party service that specializes in tax document analysis. They use encryption and don't store your documents after analysis. I verified their calculations against what my accountant told me, and everything matched up perfectly. It doesn't complete the forms for you - it analyzes your documents and gives you personalized guidance on how to fill out the forms correctly yourself. It handles both federal and state tax calculations, including for 401k withdrawals. For your 401k withdrawal, it would explain both the federal implications (like the 10% penalty) and how your state treats these distributions, since some states have different rules about taxing retirement distributions.

How does this actually work though? There's no way they have some special access to the IRS that regular people don't, right? Are you just paying them to sit on hold instead of you?

Sounds like a scam to me. The IRS is backed up for months. No way anyone is getting through in 15 minutes. I'll just keep trying the regular number myself instead of wasting money on some "service" that probably doesn't even work.

They don't have special access to the IRS, but they use technology to navigate the phone system and stay on hold so you don't have to. They basically call the IRS, go through all the prompts, wait on hold, and then call you when they have a live person on the line. I was extremely skeptical too. I thought it was either a scam or a waste of money, but I was desperate after trying for three days straight to get through on my own and always getting disconnected. I can tell you it absolutely worked - I was connected to a real IRS agent who answered all my questions about reporting my IRA distribution on the withholding calculator. They saved me hours of frustration and I finally got the information I needed.

Does every state tax early withdrawals the same way though? I thought some states don't tax retirement distributions at all, while others follow the federal rules including the penalty?

You're absolutely right that states vary in how they handle retirement distributions. Some states like Wyoming, Florida, Texas, and others have no state income tax so there's nothing to worry about there. Other states follow the federal treatment and will tax the full amount as income, plus some even add their own early withdrawal penalties on top of the federal 10%. Then there are states with special exemptions or lower tax rates for retirement income, but these often don't apply to early withdrawals. For example, Illinois doesn't tax qualifying retirement income, but early withdrawals might not qualify for that exemption.

Yes, that's exactly what the calculator is designed to do! When you enter the IRA distribution in the "other income" section and include any withholding already taken from that distribution, the calculator will recommend adjusting your W-4 to withhold more from your remaining paychecks this year to cover the additional tax liability.