Verified answer

You have to add the entire amount that was removed (not just the part that you got) to your income (in other words, you add what you got AND what they took).

You have to pay income tax on that, plus the penalty (usually 10%) for it being early.

The 10% is strictly a penalty for early withdrawal. When you file your tax return you'll have to pay income tax on the withdrawal. The amount will be dependant on your tax rate which will vary depending on your income and whatever tax bracket that puts you in.

There are no other penalties, only what was taken out initially - the penalty for early withdrawal and, of course, since you did not pay taxes on what you put into your 401k, you have to pay those on any money taken out.  The penalty is not based on how much you withdrew and the taxes you pay will only be on what you took out.

10% is the penalty. But yes, you also have to add it to your income and pay income tax on it.

You add that $3900 that you received and add it to your income. Your tax will depend on how much other money you earned during the year.

Last year we paid $24000 on $225,000 taxable income -- An extra $3900 probably won't hurt quite that much.

There is no way to. tell what your final tax bill will be because it will be based on your total income for the year.

1)  Yes, you will have to include this on your 1040.  You should receive a 1099R.

2)  Chances are that the amount withheld won't be enough.  However, as the amount withdrawn isn't that big, it shouldn't have too big of an effect on your tax refund/balance due.