Question:   If taxes are withheld from a distribution from a 401(k) plan, am I required to include the amount of the distribution as income and also pay the 10% additional tax?

Answer:    

• Generally, you need to include in income the total amount of the distribution, as reported on Form 1099-R (PDF), Distributions From Pensions, Annuities, Retirement on Profit-Sharing Plans, IRAs Insurance Contracts, etc.
• If the distribution occurs before you are age 59 1/2, you may need to pay a 10% additional tax on early distributions unless you meet one of the exceptions.  See Publication 575, Pension and Annuity Income.
• The federal income tax withheld from the 401(k) distribution along with federal income tax withheld from other sources should be reported on the appropriate line of your federal tax return.