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But the amount withheld from the distribution will have NO BEARING on the actual tax and penalties that will be due on the distribution. Don't be fooled that the worst that will happen is a 20% hit. Nothing could be farther from the truth.


The Distribution will be taxed at your marginal rate plus the 10% of distribution penalty. In effect, the minimum tax on the distribution will be 25% in just Federal tax, not counting state tax and a penalty if your state imposes one. Note, not all states impose the tax penalty on early distributions.
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